Generally, people have the notion that Income Tax Return (ITR) should be filed only by those people whose annual income is more than the tax exemption limit. If your total annual income is less than the taxable limit under the new or old tax regime, then it is not legally mandatory for you to file ITR. But as per the rules of the Income Tax Department, such people can file a ‘nil ITR’.
A nil ITR simply means that you are officially reporting to the government that your income is within the tax exemption limit and your tax liability is zero. But did you know that even without any tax liability, regularly filing your ITR every year provides you with numerous financial and legal benefits that can be very useful in the future?
6 biggest benefits of filing ITR even if you don’t have to pay tax
Even if your income falls within the tax-free limit, you should still file your ITR on time every year. Here are six key benefits of doing so:
1. Home loans, personal loans and car loans are easily available
When applying for any type of loan from a bank or NBFC, financial institutions first ask for copies of your ITR receipts for the last 2 to 3 years. ITR is the most reliable official proof of your financial stability and repayment capacity. If you have a regular ITR record, credit card and home loan approvals are faster and without any hassles.
2. Mandatory Documents for Foreign Visa (Visa Processing)
If you apply for a visa to countries like the US, Canada, the UK, Europe (Schengen), or Australia for study, employment, or travel, the embassy will likely ask you for proof of your ITR filing for the past three years. ITRs prove that you have a legitimate source of income in your home country and that you have a strong chance of returning, significantly reducing the risk of your visa being rejected.
3. Getting full refund of TDS and TCS
Sometimes, while freelancing, earning interest on bank fixed deposits (FDs), dividends, or working on a contract, your employer or bank deducts TDS (Tax Deducted at Source) on your income, even if your total annual income is not taxable. The only legal way to get this TDS refund back to your bank account is to file your ITR on time.
4. Carrying forward capital losses incurred in the stock market and business
If you incur losses in stocks, mutual funds, futures trading (F&O), or any other business, you can set off those losses against capital gains in subsequent financial years. This requires filing your ITR before the deadline for that particular financial year. If you fail to file your ITR, you will not be able to offset these losses in subsequent years.
5. Ease of buying term insurance and high-cover life insurance
When purchasing term life insurance for more than ₹50 lakh or ₹1 crore, insurance companies verify the authenticity of your income. Payslips are the only valid income proof for salaried employees, and ITRs are the only valid income proof for self-employed or freelancers. Without these, insurance companies often refuse to provide larger coverage.
6. Helpful for startups and starting your own business
If you plan to start your own startup in the future, participate in government tenders, or obtain a business loan (Mudra Loan / MSME Loan) from a bank, it’s essential to have ITR records for the past three years. ITR strengthens your financial credibility.
Who can file ‘Nil ITR’?
Students and freelancers: Those whose income comes from pocket money, tuition, or part-time projects.
Senior Citizens: Those whose income comes only from pension or bank interest and is within the exemption limit.
Homemakers: Those who earn a little by doing sewing, tuition or small jobs at home.
Small traders and farmers: Whose agricultural income or net income from business is below the taxable limit.
Avoid not filing ITR on time and reap financial benefits
The Income Tax Department now offers a simple and easy way to file your ITR online through the e-filing portal (incometax.gov.in). Submitting your return using Form 16 or other documents, either personally or through a CA, even if you have zero tax liability, proves you to be a disciplined and responsible citizen.
To strengthen your financial credentials and avoid future loan or visa hassles, file your ITR before the deadline every year.