What is nil tax return? When can you file it?

Nil tax return is filed to declare to the Income Tax Department that you fall below the taxable income and therefore did not pay taxes during the year.

Aug 09, 2019 09:08 IST India Infoline News Service

When you are just at the beginning of your career and your total annual income is less than Rs2.5 lakhs per annum, filing income tax returns is not mandatory. However, you can still choose to file income tax returns for the sake of creating records. This process is called a nil income tax return. Now, the natural question to ask at this stage is why you should make the effort of filing returns when you are below the taxable limit? Here are the reasons why.
  • Serves as your proof of income: Whether you are applying for a loan or getting an official document such as a passport made, you need to be able to furnish some proof of your income apart from your salary slips. You will even need to show proof of your income when you apply for visa while travelling to foreign countries. If you make it a point to file nil tax return from the beginning of your career, you are in effect creating an official record of maintaining proof of income.
  • To claim a refund: There are times, when tax is deducted at source such as bank deducting TDS over interest income over Rs10,000, even though you are not under the taxable limit. In such cases you are eligible for a refund. Filing a nil return is the best way to do so. In fact, in case you have been taxed mistakenly, you are even eligible to receive interest on the amount. You are liable to receive 0.5% interest for each month on the extra sum you may have paid. However, this will be applicable only if you file your returns by the specified due date as mentioned by the Income Tax Department. If you file your returns after the due date, you will have to forego the interest.
  • To carry forward losses: If you invest in the stock markets, you are allowed to offset capital losses against capital gains at a later date. This mechanism is called ‘carrying forward of loses’. However, this is only possible if you file tax returns annually to maintain the chronology of records.
How to file nil tax returns?
Filing of nil tax returns is no different for any individual than filing regular income tax returns. You can e-file your returns online in a few simple steps.
  • Login to an e-filing facilitator portal with the mandatory documents. This includes your Aadhar, PAN card, Bank account details, Form 16 and details of your investments.
  • Enter your personal information.
  • Enter your salary details and deduction.
  • Income tax is computed at this stage and it will show that you have no taxes due.
  • Enter details of investments to claim deductions.
  • Submit your return to the Income Tax Department.
  • Send to ITR-V to CPC in Bangalore to complete the process of e-filing.
So, if you have been resting easy thinking that you need not file IT returns because you have not crossed the threshold of taxable limit, you may want to re-consider your stance, as filing nil tax returns also has many advantages.

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