Filing ITR without taxable income: Details on benefits, advantages

The Income Tax (I-T) Department has opened its portal for individuals to file their income tax returns (ITR) for the assessment year 2023-24, which covers the Financial Year 2022-23 (FY23). The deadline for filing the return is July 31, 2023.

Some salaried individuals have an assumption that they don’t need to file ITR because they don’t have a tax liability. This assumption is misconceived. The tax laws mandate the filing of ITR if the gross total income in a fiscal year exceeds the basic exemption limit. However, there are certain exceptions to this rule, where ITR must be filed even if the income is below the basic exemption limit.

If the gross total income of an individual below 60 years of age is more than Rs 2.5 lakh in a fiscal year for AY 2023-24 then the person is required to file ITR. Under the old and new tax regimes, the basic exemption limit is the same for such individuals.

The benefits of filing ITR are listed below:

Claim deductions

The Centre allows certain deductions and exemptions in order to reduce the burden on taxpayers and encourage more people to pay their taxes. These deductions and exemptions can be availed of in some investments, which can help in lowering the tax an individual ultimately pays.

Additionally, even if an individual’s income is below the taxable limit, the employer may have deducted tax deducted at source (TDS) from his/her salary. In this case, the individual can claim a refund of the TDS that was deducted. The same is applicable if the individual has earned some money through freelance work and the company deducted TDS at 10 per cent.

Availing loans

One of the biggest advantages of filing an income tax return is that it can help the individual when they apply for a loan in the future. Most lenders, such as banks and financial institutions, require proof of tax returns for the previous three years when an individual applies for a loan, such as a home loan or a car loan. This is done to assess the past and current financial position and to determine whether the individual is likely to be able to repay the loan.

Legal document

One of the biggest advantages is that it acts as a legal document since it is registered with the government. It can act as a proof of identity and a proof of income as well as it has the details on an individual’s income and expenses.

Going abroad

The ITR form is one of the documents that is required by many countries when one applies for a visa. This is because a history of filing ITRs can help to demonstrate financial stability, which can make the individual a more favorable candidate for a visa.

Tax refund

By filing an ITR even if an individual’s annual income is below the taxable limit, they can claim a tax refund or set off losses. For example, if the individual has suffered losses from stock market transactions, they can carry them forward to the next year to reduce the taxable income.