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What is a Nil Tax Return and How to File It?

A nil income tax return is filed by an individual whose taxable income falls below the income tax slab and therefore, he/she is not required to pay any taxes. It is important to file an ITR irrespective of low/nil income. If you fall under this category and choose to file a nil ITR, you are declaring to the Income Tax Department that you have earned nil/low income during that assessment year. So, is it really mandatory to file a nil ITR? Read ahead to find out.

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When should I file a nil ITR?

You should file a nil ITR to showcase the following:

Show ITR as a proof of income - When you start working for the first time, your total income may likely be below the income tax limit (in most cases). You can file a nil ITR as it will serve as a proof of income. In addition, this proof of income is helpful while applying for a fresh passport or visa.

Claim a Refund - In case you end up paying more taxes than required, you are required to file an ITR in order to claim a refund. Such a situation arises when your gross income is taken into account, excluding deductions. By including deductions, your net income might be below the minimum exemption limit of Rs. 2,50,000. As per the latest income tax slab, income up to Rs. 2.5 lakhs is exempt from tax.

Procedure to file a nil ITR - Online

Filing a nil ITR does not require a special request. The procedure is the same as filing a regular ITR. You can file a nil ITR online through e-filing.

Before you begin, keep the following details ready - PAN, Aadhaar, Bank Account and Salary details, Form 16 and Investment details (if any).
Visit the official website of Income Tax Department and login in with your registered user ID/Password.
Select the option for e-filing.
Enter and submit your income/deduction details.
Your income tax will be automatically computed. It will show that you have no tax due.
Submit you return to the income tax department and send your ITR-V to CPC Bengaluru to complete the e-filing process.

Can I go without filing a nil return?

Yes you can. But it is recommended that you file a nil ITR, even though your income is below Rs. 2.5 lakhs. This will help maintain records and build a sound financial profile.

Frequently Asked Questions

I have never filed an ITR. I have applied for a visa and the passport authority has asked me to furnish my ITR. What do I do?

You need to compute your tax liability, pay the pending taxes (if any), and give a written submission to the Assessing Officer in your ward.

What is the penalty for not filing nil return?

The penalty for not filing an ITR before 31st July is Rs. 5,000. If the taxable income is less than Rs. 5 lakhs, the penalty is capped at Rs. 1,000.

Do I have to file NIL return for a company?

Yes, you have to file a nil return for your company, even if there is no revenue or activity in the company.

Do I have to file NIL return for a company even If my company does not have a bank account?

Yes, NIL return filing is mandatory for companies which do not have a bank account.

Do I have to file NIL for LLP?

Yes, you have to file a nil return for an LPP, even if there is no revenue or activity.

Which ITR form is applicable for sole proprietorship?

ITR-3 or ITR-4 is applicable for a sole proprietor/proprietorship.