What’s a Nil Return?
If you fall below the taxable income threshold and did not pay any taxes during the year, you must file a nil income tax return with the Income Tax Department. A nil return is an ITR that is submitted to the Income Tax department with the express purpose of stating that no taxes were paid for the relevant fiscal year. Only when an individual’s income falls below the 2.5 lakh rupee exemption threshold or when a rebate eliminates their tax obligation may they file nil returns. The Income Tax Act mandates that anyone making less than Rs. 2.5 lakhs to file an ITR. People who file zero returns do so on their behalf.
What is the appropriate time to submit a nil return?
Presenting an income tax return as evidence of income
Though your total income is below the taxable limit because you are just starting out, you would still like to maintain a record. Income tax can be used as evidence in a number of situations, such as when obtaining a passport or applying for a visa.
After years of filing income tax returns, you were placed in the “below taxable limit” category this year. This is a precautionary measure in case the Income Tax Department conducts an investigation in addition to continuing to keep records.
To claim a refund
Your total income may exceed the taxable limit when all deductions are taken out, but it may fall below the Rs. 2,50,000 minimum exemption level. In order to get a refund if you overpaid taxes, you have to file an income tax return.
The Importance of Submitting a Nil Income Tax Return for NRIs
If an NRI has taxable income in India, they are required under tax legislation to file an income tax return. But this requirement is not limited to considerations of income. Even though an NRI’s income isn’t taxable in India, they may still need to file a return if they engage in high-value transactions or certain expenses like purchasing real estate or making sizable credit card payments.
In addition to compliance, NRIs file Nil Income Tax Returns for pragmatic reasons. Avoiding possible legal action and tax department notices is a big benefit. The Indian tax system is getting increasingly stringent, so non-resident individuals can avoid needless complications by filing their taxes on time, even if they have no income.
Creating a Financial Footprint
A useful technique for NRIs to prove their financial presence in India is filing a Nil Income Tax Return. This recorded evidence is crucial for future financial planning, loan applications, and other financial service endeavors where a thorough financial history is required.
Applying for Loans and Financial Services
Financial institutions frequently scrutinize non-resident Indians (NRIs) who seek loans or other financial services in India. A track record of successfully filing Nil Income Tax Returns can greatly expedite this procedure. It speeds up the approval procedure for loans and other financial instruments and serves as evidence of a person’s financial responsibility.
Planning for Future Finances
Filing a Nil Income Tax Return has consequences that go beyond what is required right now. Creating an open financial history gives non-resident individuals (NRIs) the ability to manage their future finances with greater knowledge. This insight becomes especially pertinent when NRIs consider savings, investments, and other financial decisions in the context of India.
Advantages of Submitting Nil Returns
1. ITR might be necessary in order to apply for a visa.
2. Applications for passports accept nil ITR as acceptable proof of address.
3. ITR is needed as supporting documentation to determine eligibility for loan applications.
4. TDS may be subtracted by banks from deposit interest. You can request the TDS refund by submitting a zero ITR.
5. A few companies may withhold the TDS from individuals who work as independent contractors or consultants when paying them. When they are not subject to a tax bracket, they must file a zero ITR in order to receive a TDS refund.
6. Even if an individual’s income falls below the Rs. 2.5 lakh threshold, they still need to file an ITR.
7. When income falls below the Rs. 2.5 lakhs barrier, losses made in the stock market can be carried forward by filing a zero ITR.
Read More: CBIC – Taxpayers to Submit GST Annual Returns by the Deadline
Can I go without filing a nil return?
If your total income exceeds Rs. 2,50,000, you must file income tax returns. Even if filing an income tax return is not required if your total income is less than Rs. 2,50,000, we nonetheless advise you to do so.