What is an income tax return?
Individuals HUFs(Hindu Undivided Families), companies, firms, LLP, associations of persons, bodies of individuals, local authorities, and any other artificial juridical person are subject to taxation. These laws base the tax levy on an individual's residency on the tax levy. Every individual who qualifies as an Indian resident is required to pay tax on their worldwide income. Taxpayers must follow specific rules when filing their Income Tax Returns each fiscal year (ITRs).
A person can submit earnings and taxes to the Income Tax Department using a form known as an income tax return (ITR). A taxpayer's tax liability is determined by their income. The person is autorised to an income tax refund from the ITD(Income Tax Department) if the return demonstrates that extra tax was paid throughout the year. Every year, individuals and businesses that receive any income during a fiscal year are mandated by law to file an income tax return. The income could come from a salary, business profits, income from real estate, dividends, capital gains, interest, or other sources. If a person's annual income is less than Rs. 2.50 lakhs for citizens under the age of 60, they are not required to file income taxes, according to Indian income tax laws. The person is also not required to do income tax return filing.
What is a NIL Return, and Why Do You Need to File One?
Notifying the Income Tax Department that taxpayers have no taxable income for a given financial year is known as filing a nil income tax return. It is in the taxpayer's best interest to file a nil income tax return. The taxpayer is permitted to carry over a loss to future years and thereby lower their future tax liability if they file a nil return. Such a carry forward would not be permitted if the taxpayer failed to submit the nil return. Therefore, even without taxable income, taxpayers should file a nil income tax return. The Income Tax Act also makes filing a nil income tax return mandatory for certain taxpayer types. The taxpayer would inform the income tax authorities that they had no income or activities during the assessment year by filing a nil return. Let's look at the Income Tax Act's requirements for filing a nil return.
A person who earns more than Rs. 2.5 lakhs per year is required by the Income Tax Act to file an ITR-1 or ITR-2 form each year. Individual income tax returns should be filed by July 31. There may be a penalty of Rs. 5000 or Rs. 10,000 depending on when the income tax return is filed if it is not filed by December 31 or is filed after that date. The fine for submitting an income tax return after the deadline is Rs. 1000 if your yearly salary is less than Rs. 5 lakhs. An individual is exempt from filing a NIL return if their annual income is less than Rs. 2.5 lakhs.
Filing a NIL income tax return is more than crossing something off your to-do list.
Advantages of filing ITR, specifically NIL returns:
1. When applying for a visa, you may be asked to provide income tax returns.
2. For passport applications, ITR/Assessment Orders are recognised as acceptable proofs of address.
3. ITR copies are required as supporting evidence for loan applications to determine eligibility. You might think you don't need a loan in July, but you never know what will happen in November. It is better to keep records on hand than to pay the fine later.
4. Banks may deduct TDS from your deposit interest. To receive a refund, you must file an ITR.
5. If you worked as a consultant or freelancer for an organization, they might deduct TDS when paying you. If you do not fall into a tax bracket, the only way to get a refund is to do an income tax return filing.
6. If you do not file your income tax return, Section 206AB requires TDS at rates higher than the standard prescribed rates.
7. Your income in a given year could be less than Rs.2.5 lakhs, which has never happened before. Filing an ITR will assist you in keeping track in chronological order.
8. If you own a foreign asset, you must file an ITR even if your income is less than Rs.2.5 lakhs.
9. Stock market losses can only be carried forward if you file your taxes on a regular basis.
How Do You File a NIL Income Tax Return?
The filing procedure for a NIL income tax return is the same as for other ITRs. Follow the same steps on the Income Tax Department's website.
Step 1: Keep the following information handy: PAN, Aadhar, salary information, bank account details, TDS details, and Form 16.
Step 2: Go to the ITR filing site/page of the income tax department. Provide your registered user ID (generally PAN or Aadhar numbers).
You will be taken to the next screen after entering your user ID.
Step 3: Enter your password here.
If you can't recall your password, click the "forgot password" link. When you click "forgot password:
a. You will be asked to enter your user ID once more.
b. Select the option to reset the password
- OTP on the registered mobile number with Aadhar.
- Attach the Digital Signature Certificate (DSC)
- Make use of e-filing OTP
c. You will be asked to change your password after validation.
Step 4: Choose the e-filing option.
Step 5: Enter your income information and, if applicable, investment amounts.
Any TDS deducted will be displayed (you may validate in the 26AS form or Annual Information Statement)
The income tax will be calculated automatically and will show a zero balance (ZERO)
You should still file a return even if your taxable income is below the threshold at which income tax is assessed. This type of return is known as a nil income tax return (ITR). By submitting it, you are telling the Income-Tax (IT) Department that your income was so low you did not pay any taxes during that year. An ordinary resident taxpayer must file a tax return disclosing their assets and income if they have foreign assets or income. Even if your income is less than Rs 2.5 lakhs, it is advisable to file a nil income tax return.
