Introduction:

If the income of an individual taxpayer falls below the basic limit for the financial year, no tax is payable in accordance with Section 139(1) of the Income Tax Act.Consequently, they are not required to file an income tax return. Such individuals are exempt from filing returns as they fall outside the taxable bracket. However, if they choose to file a return despite their income being below the basic exemption limit, it is referred to as a ‘Nil Return.’ While filing nil returns is optional, there are numerous advantages associated with doing so.

Nil return:

A nil itr  helps notify the Tax Office that your income is less than the tax due, indicating that no tax has been paid throughout the year. Such a return is primarily sent to inform the department that no taxes have been paid during the relevant financial year. Nil ITR  apply only when income is less than the exemption limit. According to the Income Tax Act, individuals whose income is below the basic exemption limit do not have to file income tax returns. So, individuals who give zero returns are doing so for their own benefit.

• The basic exemption limits vary depending on the tax plan you choose.
• In the Old Tax Regime, the basic exemption limit is as follows:
• Rs 2,50,000 for individuals aged less than 60 years
• Rs 3,00,000 for individuals aged between 60 and 80 years
• Rs 5,00,000 for individuals aged more than 80 years
• Under the new tax regime, the basic exemption limit is Rs 3,00,000.

Benefits of filing a Nil ITR:

• Filing a NIL ITR offers more benefits than just doing the work.
• Banks can deduct TDS on interest from deposits, but filing an Income Tax Return (ITR) enables a person to claim a refund of any excess deductions.
• Section 206AB mandates higher TDS rates for non-filers, underscoring the importance of filing returns.
• ITR filing is compulsory for individuals with foreign assets, irrespective of their income.
• Some countries may require income tax returns as part of the visa application process.
• Loan applications generally require some form of Income Tax Returns (ITR) as proof of financial stability and adequacy to ensure that they are prepared for unexpected financial needs
• If TDS is deducted from freelance payments, filing an Income Tax Return (ITR) becomes essential to claim refunds if one falls below the taxable bracket. 
• Filing an Income Tax Return (ITR), even with income below Rs. 2.5 lakhs, helps in maintaining chronological income records.
• Regularly filing Income Tax Returns (ITRs) enables individuals to carry forward losses incurred in the stock market for future offsetting.
• By filing a nil ITR when the income is below the threshold, it is possible to carry forward losses incurred in the stock market.

When to File a Nil Return:

• When  your gross income falls below your taxable income, you still want to keep records. Income tax returns are proof in certain circumstances, such as when applying for a visa or obtaining a passport.
• After years of filing income tax returns, you may now be under the tax bracket for this year. This decision is to preserve the record and also as a precaution in case of an investigation from the Tax Office.
• Your total income, without factoring in deductions, could surpass the taxable limit, yet deductions may fall below the minimum exemption threshold. If you’ve paid more in taxes through TDS than necessary, filing an income tax return is imperative to claim a refund.

Steps to file a NIL ITR:

• The filing of NIL ITR follows the same procedure as any other ITR return. However, this requires readily available information such as Aadhaar and PAN details, salary information, TDS details, bank information, and Form 16. Below are the steps for filing the NIL Return:
• Visit the Income Tax Department website
• Register with Income Tax portal, or if you already have an account, log in with your registered ID and password. 
• Select the appropriate e-filing option (ITR1, ITR2, ITR3).
• Provide necessary details like name, address, bank details, PAN, Aadhaar etc. If there is no income to report, enter ‘0’ in the income section.
• As this is a NIL Return, the income tax liability will be zero, and it will be automatically computed and reflected in the ITR.
• Verify that all the entries are correct to ensure that there is no tax and submit the NIL return.
• After submitting the ITR, it should be e-Verified or a physically signed copy should be submitted to the Centralized Processing Centre (CPC) in Bangalore.

Due date:

Individuals must file a nil itr by the 31st of July of the Assessment Year, which coincides with the deadline for filing a regular return. However, filing the nil return after the due date will classify it as a belated return. In such instances of belated filing for nil returns, no late filing fees will be charged.

Conclusion:

In conclusion, the importance of filing an Income Tax Return (ITR) cannot be underestimated, even when you have no tax liability As highlighted in this blog, submitting a tax-free ITR offers many advantages. Apart from fulfilling tax requirements, it is an important proof of income, facilitates various financial transactions like passport application, visa application, loan application etc Therefore, regardless of tax liability, filing an ITR ensures you have a reliable financial record readily available when required.