Income tax countdown begins — why you should file a return even if you make less than Rs 2.5 lakh a year

A nil income tax return is filed by an individual whose annual earnings are below the taxable income threshold. Yes, these individuals do not have to pay income tax for the year, but must file an income tax return.

This shows the Income Tax Department that the assessee is below the taxable threshold.

Who should file nil ITR?

Those who earn an annual income below the taxable limit but wish to keep a record of it can file a nil ITR. Even those who have been filing income tax returns for years and have come below the taxable limit this year should file a nil ITR.

Those who have paid TDS need to file a nil ITR in order to claim a refund.

Why file a nil ITR?

ITR serves as proof of income while applying for a visa or passport. Hence, filing an income tax return is important.

It is also a preventive measure to avert automated notices from the Income Tax Department.

Key benefits of filing a nil ITR

Filing a nil ITR helps in claiming refunds against the TDS deducted by an employer. For some individuals, the total income without taking deductions into consideration may be above the taxable limit.

However, with the deductions, the income may come below the minimum exemption limit of Rs 2.5 lakh. If such individuals have paid more in taxes, they must file income tax returns to claim a refund.

Filing a nil ITR is also beneficial for those planning to apply for loans. At times, banks or other lending institutions ask the individual to produce an ITR to sanction the loan amount.

How to file a nil income tax return online

Filing a nil return is similar to filing a regular income tax return. An individual needs to enter the details of income and deductions. The income tax will be computed and shown as one without dues.

The individual will then have to submit the return to the income tax department by sending the ITR to CPC Bengaluru to complete the e-filing process. This can also be done online.