Filing Nil Return- Business News

Filing Nil Return

There is no separate form or process for filing nil tax and the entire process is similar to filing a normal return.

 Jinsy Mathew   
  • Mumbai,  May 18, 2016  
  • |  
  • UPDATED   14:49 IST

It is often thought that if an individual is earning less than Rs 2.5 lakh in an assessment year, then such an individual needn't file income tax return. According to Alok Agarwal, managing director of financial services firm Alankit Assignments Ltd, says, "Even if it is not necessary for an Indian citizen to file a nil tax, it is always recommended as filing nil tax helps in many ways."

There is no separate form or process for filing nil tax and the entire process is similar to filing a normal return. The Form to be used remains ITR-1 Sahaj.

What is nil return?

Nil income tax return is a document which shows that you as an Indian citizen fall below the taxable income and therefore did not pay taxes during the year. Though legally there is no compulsion to file nil return, this document comes in quiet handy in the years ahead.

Benefits of filing nil return:

Standard declaration of income
There is no better legal document which provides the details of your financial standing. Also, it is a valid document and is accepted by all financial institutions as proof of income.

While applying for loans
Its quiet a common practice for bankers to ask for the last three to five years of tax returns filed while applying for car, home loans. In such a situation, if you are newly employed even nil tax return would suffice as proof of income.

VISA Application
When it comes to VISA application, there is a requirement to furnish proof of income. Here too, nil return comes handy. For example: While applying for Schengen Visa, it is mandatory to support visa documents with return filed over last three years, even if the income is nil.

Claim tax refund
Suppose if your employer has deducted tax at source, but after all the rebates, if income comes in below the threshold limit, then you are entitled for a refund. In such a case, it is impossible to claim any tax refund without filing a return. Therefore, even though income generated is under the prescribed limit, one has to file atleast a nil tax to claim the refund

Set off loses
Suppose if an individual has suffered some loss in stock market transaction and wishes to carry forward that to next year, then filing a return even if it is nil return, is mandatory.

Other than this, one has to realize that are instances where it is mandatory to file return irrespective of the fact whether you earn income or not. Agarwal notes that according to the Income Tax rules, if an individual possess any foreign asset, even if there is no earning from such an asset, it is mandatory for the asset holder to file return.

Lastly, it would do us well to remember that filing income tax return creates financial credibility which is very difficult to gain otherwise.