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What is a Nil Return and when should you file one?

Updated on: May 29th, 2023


6 min read

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When the income of an individual taxpayer is below Rs.2.5 lakhs in a financial year, the tax liability is zero; thus, such individuals do not have to pay any income tax. Such individuals do not have to file an income tax return as they do not fall in the tax bracket. But if they file ITRs even when their income is below Rs.2.5 lakhs, it is termed ‘Nil Return’. Although it is not mandatory to file nil returns, there are many benefits to filing nil returns.

What’s a nil return?

A nil income tax return is filed to show the Income Tax Department that you fall below the taxable income and therefore did not pay taxes during the year. A nil return is an ITR filed specifically to declare to the Income Tax department that no taxes have been paid in the respective financial year. Nil returns can be filed only when the income is below the exemption limit of rs.2.5 lakhs or when a rebate reduces the tax liability to zero. As per the Income Tax Act, it is mandatory for individuals earning less than Rs.2.5 lakhs to file ITR. Thus, individuals filing nil returns file it in their own interest.

When should I file a nil return?

To show income tax return as proof of income

  • You are just starting out and your total income falls below the taxable limit, but would like to keep a record. There are several instances where income tax serves as a proof, say when you are applying for visa or while getting your passport made.
  • You were filing your income tax returns for many years and fell into the ‘below taxable limit’ this year. This is to continue maintaining a record and also preventative measure in the event of a scrutiny from the Income Tax Department.

To claim a refund

Your total income without taking deductions into account could be above the taxable limit, but with deductions might be below the minimum exemption limit of Rs.2,50,000. If you paid more in taxes than you needed to, you must file an income tax return to claim a refund.

Can I go without filing a nil return?

Filing income tax returns is mandatory for those whose total income is more than Rs.2,50,000. We recommend that you file your income tax return, even though it is not mandatory if total income isn’t over Rs.2,50,000.

How do I fill up a nil return online?

Filing a nil return is no different from filing a regular income tax return.

  • Enter your income details and deductions. Income tax is computed and you will be shown that you have no tax due.
  • Submit your return to the Income Tax Department. And send your ITR-V to CPC Bangalore to complete the e-filing process.

Click here to read our guide to e-filing.

Benefits of filing nil returns

  • ITR may be required for applying for a visa.
  • Passport applications accept nil ITR as valid proof of address.
  • ITR is required for loan applications as supporting evidence to ascertain eligibility.
  • Banks may deduct TDS on interest on deposits. The TDS refund can be claimed by filing nil ITR.
  • A few organisations may deduct the TDS of people working as consultants or freelancers while disbursing their payment. They need to file nil ITR to claim a TDS refund when they don’t fall in the tax bracket.
  • Filing ITR is mandatory for individuals who own a foreign asset even when their income is below the threshold of Rs.2.5 lakhs.
  • It is possible to carry forward losses incurred in the stock market by filing nil ITR when the income is below the threshold of Rs.2.5 lakhs.

Due date to file nil income tax return

Individuals must file a nil return before 31st July of the Assessment Year. The due date for filing a nil ITR is the same as a regular return. However, if the nil return is filed after the due date, it will be considered as a belated return. In case of belated filing of nil returns, no late filing fees will be charged.

Frequently Asked Questions

I did not file my income tax returns for the last 3 years. I have applied for visa now and have been asked to furnish my income tax return. What do I do?

You must compute the tax liability, pay any pending taxes for that year and give a written submission to the Assessing Officer in your ward.

Which ITR form is applicable in filing nil income tax return?

The ITR form will be applicable based on the source of income and the type of person filing the return.

Is it optional for the companies to file nil income tax return?

Companies are mandatorily required to file income tax returns irrespective of profit or loss.

Is there any time limit to file the nil return?

Nil Returns must be filed within the due dates specified under section 139(1) of the Income Tax Act. The taxpayers can also file a belated return within the due dates specified under section 139(4). Until 2017-18, there was no penalty for filing a belated return. However, as per the amendments made in the Finance Act 2017, taxpayers are liable to pay a penalty of Rs 5,000, if they file their income tax return after the return filing deadline (usually 31st July of the relevant AY unless extended) but before 31st December of the AY. The penalty will increase to Rs 10,000, if the income tax return is filed between 1st January and 31st March of the relevant AY. However, if the total income of the taxpayer is less than Rs 5 lakh, the penalty shall not exceed Rs.1,000.

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