People generally believe that Income Tax Returns (ITRs) should only be filed by those whose annual income exceeds the tax exemption limit. If your total annual income is below the taxable limit under either the new or old tax regime, filing an ITR is not legally mandatory. However, according to the Income Tax Department’s rules, such individuals can file a “Nil ITR.”
Nil ITR simply means that you are officially informing 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 an ITR every year provides you with numerous financial and legal benefits that can be very useful in the future?
6 Major Benefits of Filing an ITR Even If You Don’t Have to File Taxes
Even if your income falls within the tax-free limit, you should still file your ITR on time every year. Following are the six major benefits of doing so:
1. Home loans, personal loans, and car loans are easily approved.
When applying for any type of loan from a bank or NBFC, financial institutions first ask for ITR receipts for the last two to three years. ITRs are 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 Visa Processing
If you apply for a visa to countries like the United States, Canada, the United Kingdom, Europe (Schengen), or Australia for study, employment, or travel, the embassy asks for proof of filing ITRs for the last three years. An ITR proves that you have a legitimate source of income in your home country and that you have a strong chance of returning there, significantly reducing the risk of your visa being rejected.
3. Getting a 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 in Stock Market and Business
If you have incurred losses in stocks, mutual funds, futures trading (F&O), or any other business, you can set off those losses against your capital gains/profits in the following financial year. 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 adjust the losses in subsequent years.
5. Ease of Purchasing Term Insurance and High-Cover Life Insurance
Insurance companies verify the authenticity of your income when purchasing term life insurance of more than ₹50 lakh or ₹1 crore. For salaried employees, payslips are the only valid proof of income, while for self-employed or freelancers, ITRs are the only valid proof of income. Without this, insurance companies refuse to provide significant 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 Mudra Loan/MSME Loan from a bank, it is mandatory to have ITR records for the last three years. ITR strengthens your financial credibility.
Who can file a ‘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 small income from sewing, tutoring, or odd jobs at home.
Small traders and farmers: Those whose agricultural income or net business income is below the taxable limit.
Avoid not filing your ITR on time and reap the 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 yourself or through a CA, even if you have zero tax liability, proves you to be a disciplined and responsible citizen.
To strengthen your financial standing and avoid future loan or visa hurdles, file your ITR before the deadline every year.