You may not be liable to pay any tax but should still file your return.
Have you been told that if your income is below taxable limit you don’t need to file income tax return (ITR) at all? You may need inputs on the same, as you may file ITR even if your income is below the taxable income. Such filings are referred to as ‘NIL’ return or NIL ITR, the concept of which we will explore in detail.
What is ‘NIL’ ITR?
If the income for individuals or as specified for different groups is below the taxable limit of Rs 2.5 lakh, then it is not mandatory to file the ITR. But in case you opt to file ITR, your tax liability would be ‘NIL’. Therefore, such a return filing is also known as NIL return.
When you should file a ‘NIL’ ITR?
For Claiming Tax Refund
IT department has made it compulsory to deduct TDS at the prescribed rate for payouts such as salary, interest, rent, and more when the amount is higher than the threshold limit. For example, if interest income from a bank FD is higher than Rs 10,000 in a financial year, then the bank deducts TDS at the prescribed rate from the entire interest amount. If an individual doesn’t fall in any of the tax brackets, then he/she can provide Form 15 G/H, to instruct banks to not deduct the TDS.
If you have not filed 15 G/H with the bank and you want to claim a refund of TDS, then you can do so by filing the NIL ITR. Similarly, in other cases where TDS has been deducted, you can claim the amount back by filing ITR. Without filing ITR, there is no other way to claim the TDS refund once it has been deducted.
To Carry Forward Capital Losses
If you have incurred short or long-term capital losses in a year, then you are allowed to carry such losses for eight consecutive years, provided you have filed the ITR without any break. If you fail to file the ITR during these years, you cannot carry it forward to next year. It is also mandatory to file the ITR before the due date to carry forward such losses if you have delayed beyond the due date. In certain cases, the IT department may make exceptions to this rule if one has a genuine reason for not filing the ITR.
To Apply For a Loan
If you have plans to apply for a loan like Home Loan, personal loan, immediately or sometime in the future, you must file the ITR because banks usually ask for the last three years ITR details. Banks consider ITR an income proof and accordingly assess repayment capacity of the borrower. In the absence of ITR details, banks may take longer to process a loan and may seek additional security to cover repayment risk.
For High Non-taxable Income
You may not fall in any of the tax brackets and yet your non-taxable income may be very high. For example, if you have earned income from tax free bonds or other not taxable sources which happened to be higher than Rs 2.5 lakh, you should file an ITR showing your non-taxable earnings, which could also work as proof of your income. You can furnish this ITR wherever income proof is required.
Remember that despite lower- than-threshold income limits you may need to file an ITR in situations wherein you have an immovable property at an overseas destination, have a bank account in a foreign country, etc. So think twice before skipping the ITR process!