NIL Income Tax Return (ITR) - File and avoid big loss in 2024-25

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Despite having a population of more than 1.4 billion, only about 80 million people in India file income taxes. A frequent misunderstanding is that an individual does not have to file an Income Tax Return (ITR) if their taxable income is zero. Even in cases when there is no tax owed, there are strong arguments for filing a NIL income tax return. Recognizing and following these explanations can help prevent large financial losses.

What is NIL ITR?

When there is no tax due, submitting an income tax return is referred to as a NIL ITR. There is a small difference between the tax slabs under the Old and New Regimes:

Old Regime: No tax is payable for an annual income up to ₹2.5 lakhs.
New Regime: No tax is payable for an annual income up to ₹3 lakhs.

Even with these exclusions, it’s imperative to file a NIL ITR. This is the reason why:

1. Tax Rebates and Deductions

An ITR must be filed in order to get tax deductions and rebates. Under Section 87A of the Old Regime, individuals with incomes up to ₹5 lakhs are eligible for a tax credit of ₹12,500. Moreover, a ₹50,000 standard deduction is also applied. Similar to this, under the New Regime, when combined with the standard deduction, a tax rebate of up to ₹25,000 is available, effectively removing tax from incomes up to ₹7.5 lakhs. Only those who file an ITR are eligible for these advantages.

2. Claiming Tax Refunds

Tax Deducted at Source (TDS) may make you eligible for a refund even if there is no tax owed. TDS is frequently withheld from interest received on fixed deposits, savings accounts, and professional services. You can get your money back from the deducted tax by completing an ITR..

3. Carry Forward of Losses

You can lower your future tax obligations by using your ITR to carry forward business or capital losses against future income. To dramatically reduce taxable income, for example, a company loss of ₹10 lakhs can be used as an offset against future earnings.

4. Proof of Income

An ITR is used to demonstrate income for a variety of financial transactions. An ITR is frequently needed when applying for a loan, insurance, or any other financial instrument. It offers a reliable record of your earnings, particularly for professionals and independent contractors who might not have pay stubs.

5. Visa Applications

An ITR is frequently needed in order to apply for a visa for people who intend to go abroad. It serves as documentation of income and financial security.

Legal Implications of Not Filing an ITR

There may be legal repercussions if an ITR is not filed when required:

Late Filing Fee: A penalty for filing after the due date.
Interest Penalties: Accrued at 1% per month on due tax if filed late.
No Loss Carry Forward: Inability to offset future income with past losses.
Tax Evasion Charges: Non-filing may be considered tax evasion, potentially leading to imprisonment.

How to File an ITR

It can be simple to file an ITR. You may get help learning how to file your taxes by watching step-by-step videos and reading comprehensive tutorials. In addition to offering tax advantages, timely filing keeps your financial record spotless.

Conclusion

Filing a NIL ITR, even with no taxable income, is crucial for claiming tax benefits, obtaining refunds, carrying forward losses, providing proof of income, and fulfilling visa requirements. Ensuring that you file your ITR on time helps maintain compliance and avoid legal issues.

Remember, timely ITR filing keeps your financial record clean and ensures you reap the benefits you’re entitled to. Share this information with others to highlight the importance of filing ITR, and stay updated with the latest financial tips by clicking the bell icon .