NIL RETURN | What is nil return? Do I need to file nil return?

Nil return filing is compulsory or not


Nil return filing is compulsory or not.

What is a Nil return? Do you need to file this? What are the consequences of filing or not filing such return? In this post, you may find the answers to all such queries in a nutshell.

What is a Nil return?

Individuals, having taxable income below rupees 250000, filing return without paying any tax is a Nil return. In brief, Income Tax Return with zero tax liability is called Nil return. If your annual income does not exceed to maximum exemption limit, your tax liability becomes nil. At present, the maximum exemption limit is rupees 250000 for individual below 60 years.

But now the question is whether you should file a Nil return or not.

Let me explain, there are two aspects regarding nil return. First, when your taxable income is less than the maximum exemption limit. Second, when your gross annual income is not more than that limit. Are you getting confused between taxable income and gross income?

What is Taxable Income and Gross income?

Taxable income is the income derived from gross income after deductions and some expenses in lieu of calculating tax liability.

Gross income is the total income from salary/ wages/ pension, from savings, from house property etc. before any deductions for a tax rebate.

For whom it may compulsory.

Suppose, your gross annual income is more than 2.5 lakh. After the deduction under section 80C to 80U for your savings investments your taxable income comes below the exemption limit. Thus, your tax liability becomes nil. Filing ITR, in this case, is mandatory for you as per existing IT rules. If you ignore or even you fail to file it before the due date, the IT department can levy a penalty on you.

For whom it may not compulsory.

On the other hand, if your gross annual income before any deductions does not cross the basic exemption limit, the filing tax return is not mandatory for you. In this case, you may file your return, only if you desire so. Though at this point it is not compulsory to file your IT return, in my opinion, you should desire so for some benefits. Because filing a nil return has its own benefits too.

Here to mention:

The maximum exemption or basic exemption varies in different age levels. For individual below 60 years, such exemption is rupees 250000. Individuals below 80 years but more than 60 years is rupees 300000. The exemption is rupees 500000 for individual above 80 years.

Benefits for filing Nil returns income tax

Also see: Online income tax filing -an ultimate guide
  •     If you previously filed your ITR, you should not discontinue even in case of your tax liability becomes nil to avoid receiving any notice from the income tax department.
  •      Sometimes your bank may deduct TDS from your savings or investments. But as per your income level, your tax liability is zero. So, you have to file your Nil income tax return to get back your money.
  •     The acknowledgement of your return is an essential document. It is an income proof certificate. Your bank will ask for IT return for passing your loan to check your financial status.
  •     For processing your visa you need to furnish your tax returns. Hence, you should file nil return of income tax without payment of tax.
  •     If the IT department finds that you did not file your return that you have to be filled, you may be penalized of rupees 5000 to 10000. Hence, filing return keeps you free from the anxiety of being penalized from the income tax department.

Hope, you have understood the importance of Nil return filing. Now you can easily take the decision to file it or not. Hence, act accordingly with a sigh of relief. Do not forget to share this piece, if you think so. Feel free to comment any more relevant details.

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