Nil Income Tax Return - Reasons Why You Should Still File

You should file a NIL ITR in the below-mentioned scenarios:

1. To prove income is below the taxable threshold: If your income is below the taxable limit, you can file a NIL ITR to maintain a record. This ITR can be used as proof of income when you are applying for a passport or visa.

1. When your income falls below the taxable limit: If you were previously employed and paying taxes, but you are no longer working with the same organisation. Now your current income is below the taxable threshold, you can choose to file a NIL ITR. Doing so will help you maintain a record and also declare your new income to the Income Tax department.

1. To raise a refund claim: Even though your income falls in the taxable income bracket, applying Section 80C deductions can bring it down. In such cases, it is important to file a NIL ITR to claim a refund on Tax Deducted at Source (TDS) and to maintain a record.

1. To carry forward losses: If you have suffered capital losses in the previous financial year, it is mandatory for you to file a NIL ITR to carry forward your losses. These losses can be adjusted with future gains and help you reduce your overall tax liability.

Benefits of Nil Income Tax Return

The below-listed are some of the benefits of filing NIL ITR: 

It serves as a proof:

The NIL ITR serves as a proof when you are applying for a high-value loan, passport, or visa. Even if your income is not taxable, filing a NIL ITR can be beneficial to maintain a consistent record.

To prevent scrutiny:

If you continue filing every year regardless of the value of the income derived, it ensures continuity and helps when you get a raise and income becomes taxable. It also prevents unnecessary scrutiny by the IT department when they carry out random checks on tax evasion.

For carrying forward losses:

It helps non-salaried taxpayers such as businessmen to get the benefit of carrying forward losses if the return is filed before the deadline. In case of capital gains in the following assessment years, losses cannot be vetted against the losses of previous year(s).

For claiming TDS refund:

In situations where there is deduction of TDS such as interest by banks on investments, the refund can be claimed only by means of filing a tax return. It also works in your favor when TDS is deducted by the landlord on the rent paid.

How to file a NIL ITR online?

Follow the steps mentioned below to file a NIL ITR:

Step 1: You need to login to the income tax portal.

Step 2: On the menu bar, click on the option ‘e-File’. Next, click on the ‘Income Tax Returns’.

Step 3: From the side menu, choose the option ‘File Income Tax Return’.

Step 4: Enter all the information related to your income and other deduction details.

Step 5: Choose the correct ‘Assessment Year’ and filing type.

Step 6: Select the filing status from the options present and the type of ITR.

Step 7: The system will automatically calculate your tax liability once you have entered all the information.

Step 8: If your income is not taxable, it will show no tax liability.

Step 9: Once you have checked all the details, submit your ITR.

Step 10: The Next important step is to e-verify your ITR. You can do so either online using Aadhaar OTP, a net banking account, or a Demat Account. Alternatively, you can download a copy of ITR and send a signed copy back to the Centralized Processing Center (CPC) in Bengaluru by post, within 120 days of e-filing.

Points to Remember while Filing Nil Income Tax Returns

1. The process of filing nil returns is the same as filing returns for taxable income. It can be filed online via the e-filing process.
2. The IT department only accepts returns filed for up to the preceding assessment year and the current year.
3. For previous years, the tax liability must be computed manually and submitted to the assessing officer in the ward. Pending taxes (if any) should be remitted manually.