What Is a Nil Return: When Should You File Nil ITR?

What is a Nil Tax Return?

A nil income tax return is filed by a person whose taxable income falls below the basic exemption limit, therefore, the individual need not require to pay any taxes. A person falling in this category can choose to file a nil income tax return, by doing this you are declaring to the Income Tax Department that you have earned low/nil income during that particular financial year.

When a Nil tax Return is required to be filed?

An individual can opt to file a Nil tax return when:

• To show income tax return as proof of Income.
  In a scenario where an individual has just started up with his career and his income falls below the taxable limit, however, he wants to keep a record by filing the Nil ITR. There are many other instances also where income tax serves as a proof of income like when one is getting a passport made or applying for a visa etc.
• To claim a refund
  There is a possibility that your income is above the taxable income but with the help of deductions u/s 80C etc, it might be below the exemption limit of Rs. 2,50,000. You must need to file an ITR to claim a refund, if the taxes / TDS paid are more than required.
• To carry forward losses
  To set off your capital gain losses with the capital gains in the upcoming assessment year you are required to file the current income tax return even if there is no taxable income.

What is the procedure to file a Nil income tax return?

The procedure of filing a Nil ITR is the same as filing a regular ITR. You can file a nil ITR online through the following steps.

• The following documents should be kept handy before filing the Nil ITR - PAN, Bank account details. Salary details, Aadhaar, Form 16 and Investment details.
• Visit the official website of the Income Tax Department, using your registered user ID/Password login.
• Click on the e-filing option.
• Enter the income/ deduction details.
• Now your Income tax will be automatically computed and it will display that you have no tax liability.
• Submit your return to the income tax department and post your ITR-V to CPC Bengaluru / E-Verify the ITR to complete the e-filing process.

Alternatively, you can file a NIL ITR with File My Tax online through the following steps:
File it Yourself	Upload form 16	Submit

What are the benefits of filing a Nil ITR?

Filing Nil ITR is beneficial in the following ways:

• Authentic Proof of Your Income:
  It serves as a legal document mentioning all the details of your financial status. It is considered as a solid proof of income and is accepted by each and every financial institution.
• To claim a refund:
  Sometimes TDS is deducted on the income earned even if the total income during a financial year is below the exemption limit. To claim such a deduction, an individual must mandatorily file an income tax return.
• Legal proof while applying for loans:
  Bankers usually ask for the last three to five years of income tax returns while approving any kind of loan. A nil tax return can help in such a situation as it will act as a legal document.
• Applying for Visa:
  A NIL tax return can act as a legal proof of income when it comes to a VISA application. It is compulsory even if you didn’t have any income for instance, to show the returns filed over the last three years when applying for a Schengen Visa.
• Carry-forward of losses:
  Filing a return even if its a Nil return becomes mandatory if an individual has suffered losses and wants to carry forward it to the next year.

Can one avoid filing Nil ITR?

It is mandatory for those whose total income is more than Rs. 2,50,000. However, we recommend that you should file your income tax return, even though it is not mandatory if total income isn’t over Rs. 2,50,000.