When an individual’s income is below the basic exemption limit in a financial year, their tax liability is zero, and they are not required to file an income tax return under Section 139(1) of the Income-tax Act, 1961. These individuals are exempt from filing returns as they fall outside the taxable income bracket. However, if they choose to file a return despite having no tax liability, it is called a Nil Income Tax Return. While filing a Nil Return is not mandatory, it offers several benefits.
What is Nil Income Tax Return?
A Nil ITR is a type of tax return filed by individuals whose total income in a financial year is below the basic exemption limit. This means they have no taxable income and no tax liability. Filing a Nil Return is not compulsory for such individuals, as they fall outside the taxable income bracket as per Section 139(1) of the Income-tax Act, 1961.
The basic exemption limit depends on the chosen tax regime and the taxpayer’s age:
- Old Tax Regime:
- ₹2,50,000 for individuals below 60 years of age.
- ₹3,00,000 for individuals aged between 60 and 80 years.
- ₹5,00,000 for individuals above 80 years of age.
- New Tax Regime:
- ₹3,00,000 is the exemption limit for all taxpayers, regardless of age.
Due Date file Nil Income Tax Return
Individuals are required to file a Nil Income Tax Return (ITR) by 31st July of the Assessment Year. The due date is the same due date as filing regular income tax returns. Filing a Nil Return after this deadline will categorize it as a belated return.
Unlike regular belated returns, filing a belated Nil Return does not attract any late filing fees, as there is no tax liability involved. However, filing the return on time is advisable to maintain a consistent financial record and avoid any unnecessary complications, such as delays in processing refunds or discrepancies in tax documentation. Timely filing of Nil Returns also reflects financial compliance, which can be beneficial for future financial transactions like securing loans or visas.
How to File Nil Income Tax Returns
A Nil Return is filed in the same manner as a regular return. One can file a Nil return in the following ways:
- Income Tax e-Filing Account
- Log in to your account on the Income-tax e-filing website, and prepare and file a return.
- Prepare ITR offline using the utility
- Prepare your return offline through Income Tax Utility and file the return from your login on the e-filing website.
- File through a DIY platform
- File your Income Tax Return (ITR) through an ERI like Quicko.
What are the benefits of filing a Nil Tax Return?
In case your income is less than the basic exemption limit, you can still file a Nil ITR. The following are the benefits of filing a Nil Tax Return:
- Authentic Proof of Income: A Nil ITR serves as a legally recognized document that provides a clear record of your financial status. Financial institutions and agencies widely accept it as valid proof of income.
- To claim Refund of TDS: Sometimes, Tax Deducted at Source (TDS) is deducted from your income, even if your total income is below the exemption limit. Filing an income tax return is essential to claiming a refund of such TDS.
- Legal Proof While Applying for Loans: Banks and financial institutions often require income tax returns from the last three to five years to approve loans. Submitting a Nil ITR strengthens your application by serving as legal proof of your financial history.
- Applying for a Visa: Many countries require applicants to provide income tax returns from the past few years as part of the visa process. A Nil ITR serves as legal proof of your income and financial history, making it essential for visa approvals.
- To Carry forward losses: To carry forward the losses of business to the next financial year ITR filing is mandatory. Hence, it is good practice to file a tax return.
FAQs
It is mandatory to file the income tax returns online for all the registered taxpayers whose taxable income. However, paper returns can be filed by those who are above 80 years of age and do not have any income from regular business or profession.
No, fees u/s 234F shall not be applicable in case your income is below the exemption limit or nil.
It is recommended that an individual file an NIL return, even if the taxable income is less than INR 2.5 Lakhs.
Hey @TeamQuicko
Can you tell me about ITD’s new ITR filing utility for AY 2021-22?
Hey @HarshitShah
To improve the tax filing process, the Income Tax Department has decided to do away with the excel and java-based utility and has launched a new offline JSON-based utility for the AY 2021-22. The new utility will help taxpayers import prefilled data and edit it before filing the income tax return (ITR).
The taxpayers can download the pre-filled data from the income tax e-filing portal and fill in the rest of the data. This imported prefilled data can be edited to change basic information such as address and all. Currently, the utility can be used to file ITR1 to ITR 4. ITD has also released a step-by-step guide to using the utility.
Hope this helps!
Is it possible to file ITR online without an account on the Income Tax e-filing portal?
What should be done in case of discrepancies in actual TDS and TDS credit under Form 26AS?
Hey @Amitabh_Verma
It is mandatory to create an account on the Income Tax e-filing portal to file your ITR online. It is a hassle-free quicko process. One can register on the portal by providing relevant details such as user type, PAN, first name, surname, date of birth, and fill in the registration form.
Hey @Niraj
Many times mismatches and discrepancies in actual TDS and TDS credit under Form 26AS happen because of wrong information provided in the TDS return. One can approach the employer/deductor to file a revised TDS return after making the necessary corrections.
The income-tax department allows an assessee to mention the reason for mismatch in the online portal in answer to a notice sent by them.
Hope this helps!
Hi, actually I filed ITR 1(A.Y. 2013-14) due to notice served in Jan month.
The ITR is pending for verification. Ask the options aren’t available for me client i.e Aadhar verification,evc etc. Only thing is I got my clients DSC. but option of DSC for e-verification is not showing. I can’t send CPC to Bengaluru since it will take time. How can I use DSC to e-verify my already filed return
Hi @Arsheen
The option to e-verify ITR using DSC is to be selected while filing. Once you have filed your ITR only option available for e-verification is EVC/Aadhar OTP or sending ITR V to CPC Bangalore. You have 120
days from the date of e-Filing to e-verify your ITR.
So if 120 days are not over you can send the signed ITR V to CPC Bangalore to get it e-verified and processed.
Hope this helps
Hi @Sharath
It is suggested to file ITR as NRI in India if you have trading transactions even if there are losses.
If you do not file ITR then there are high chances of your PAN getting flagged by the IT department for non-filing of ITR.
Also, If you file the ITR on time you can take benefit of carry forwarding the losses and setting off those losses against the profits in future years.
I have started an HUF by infusing funds by collecting gifts from HUF members. If I invest in Shares, Equity MF, from that Capital (Collected as gifts from members), and earn income in the name of HUF, will that income be clubbed with the income of the members?
In a way that will be the outcome of the business (trading and investing of shares) done by HUF. And there will be a degree of efforts and luck involved, not a fixed income instrument as FD, etc.