Income of Rs 12 lakh, hence zero tax: Is ITR filing still mandatory from April 1, 2026?

ITR filing 2026: From April 1, 2025, taxpayers earning up to Rs 12 lakh a year saw a major shift in their income tax liability under the New Tax Regime. Thanks to Finance Minister Nirmala Sitharaman, who introduced major, favourable reforms to the new tax regime (default for FY 2025-26/AY 2026-27), making income up to Rs 12 lakh tax-free through an increased rebate (Section 87A) to Rs 60,000.

The basic exemption limit was raised to Rs 4 lakh, and a Rs 75,000 standard deduction applies for salaried individuals, potentially pushing the zero-tax income limit to Rs 12.75 lakh.   

Following the last Budget announcement, the income threshold for zero tax, after claiming rebate under Section 87A, was raised from Rs 7 lakh to Rs 12 lakh, excluding income taxed at special rates. The change got into action from April 1, FY 2025–26, which will be relevant to Assessment Year (AY) 2026–27, which starts from April 1, 2026. 

But while the tax payable may be zero, the compliance requirement has not disappeared.

Do you need to file an ITR if tax is zero?

Yes. If your taxable income exceeds the basic exemption limit, filing an Income Tax Return (ITR) remains mandatory to claim the rebate under Section 87A. The zero-tax benefit is not automatic. Taxpayers must file their ITR to reduce their final tax liability to nil.

In effect, individuals earning between Rs 4 lakh and Rs 12 lakh under the new tax regime will have to file returns to ensure they pay no tax. Earlier, a taxpayer earning Rs 12 lakh would have paid nearly Rs 80,000 in tax. That liability is now eliminated—but only after filing the return.

Who is exempt from filing ITR?

Budget 2025 also raised the basic exemption limit under the new tax regime from Rs 3 lakh to Rs 4 lakh. From April 1, 2025, individuals earning up to Rs 4 lakh are not required to pay tax or file an ITR.

According to tax experts, exemption from filing applies strictly up to the basic exemption limit. CA Dr Suresh Surana had earlier told Business Today that filing is compulsory once income crosses Rs 4 lakh under the New Tax Regime, even if tax payable eventually becomes zero after rebate.

Cases where ITR filing is compulsory

Under Section 139 of the Income-tax Act, ITR filing is mandatory in certain situations regardless of income. These include:

Current account deposits exceeding Rs 1 crore

Annual electricity bills above Rs 1 lakh

Foreign travel expenses over Rs 2 lakh

Professional receipts exceeding Rs 10 lakh

TDS or TCS exceeding Rs 25,000 (Rs 50,000 for senior citizens)

Rebate applies with conditions

The enhanced rebate of Rs 60,000 under Section 87A is available only if total income does not include special-rate incomes such as long-term or short-term capital gains. Any such income could reduce or eliminate the rebate benefit.

New tax slabs from April 1 (FY 2025-26/AY 2026-27)

The new tax regime now has seven slabs, including a 25% rate. 

Rs 0–4 lakh: Nil

Rs 4–8 lakh: 5%

Rs 8–12 lakh: 10%

Rs 12–16 lakh: 15%

Rs 16–20 lakh: 20%

Rs 20–24 lakh: 25%

Above Rs 24 lakh: 30%

Why filing an ITR still makes sense

Even where filing is not mandatory, submitting an ITR can be useful. A zero or nil return serves as proof of income, helps with loan approvals, and is often required for visa applications.

Bottom line: From April 1, 2025, earning Rs 12 lakh may mean zero tax for you, but you have to file an ITR as per your schedule from April 1, 2026, to claim that benefit and stay compliant.