 "Should you file ITR if your income is not taxable? Details and benefits")
Tax season is upon us, and many people are wondering if they have to file returns if their income is below the taxable limit.
Filing an Income Tax return (ITR) is mandatory if your total income exceeds the basic exemption limit. If it is below the limit, certain types of income, such as capital gains or income from foreign assets, may still require you to file an ITR. Additionally, if taxes were deducted at source (TDS) from any income, like interest from a bank deposit, you must file an ITR to claim a refund for the excess TDS or other tax payments made during the financial year.
Under the old tax regime, you can receive a maximum tax rebate of up to Rs 12,500, and under the new tax regime, it can be up to Rs 25,000. Consequently, you do not need to pay any income tax if your income is within these specified limits. However, even if your tax liability is reduced to nil due to these rebates, you are still required to file an income tax return (ITR).
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What is a NIL return?
A ‘NIL return’ refers to a type of tax return that is filed when an individual or entity has no income or financial activity to report for a particular period. A nil return is an ITR filed specifically to declare to the Income Tax department that no taxes have been paid in the financial year.
Why should you file an ITR even if you have no Income Tax liability?
There are many benefits of filing an ITR, like claiming a tax refund, getting a visa, carrying forward capital losses, and many more. The following are a few of these benefits discussed in detail:
Proof of income: Your ITR serves as an official document that can be used as proof of your income. This can be helpful when applying for loans, visas, or other financial transactions where you need to demonstrate your financial standing.
Claim deductions and refunds: Even if your income is below the taxable limit, you may have paid taxes through TDS (Tax Deducted at Source) on your salary, interest, or other sources of income. By filing an ITR, you can claim a refund of the excess taxes paid.
Additionally, you can claim deductions for various investments and expenses, such as those under Section 80C, 80D, and others. This can help reduce your taxable income further and potentially result in a tax refund
Easy loan approvals: Income tax returns serve as authenticated income proof, making it easier to obtain loans from lending institutions.
Carry forward losses: If you have incurred any losses, such as from stock market investments or business operations, you can carry them forward to the next year and set them off against your future income. However, to do this, you need to file an ITR.
Eligibility for government schemes: Some government schemes and benefits, such as scholarships or subsidies, may require you to have filed your ITR as a prerequisite. By filing your ITR, you can ensure that you are eligible for these benefits.
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 favourable candidate for a visa.