What Is A Nil ITR And Should You File One?

If you are under 60 years old with an annual income below Rs 2.5 lakh under the old tax regime, or below Rs 3 lakh under the new tax regime, you are eligible to file a Nil ITR

If you’re a freelancer, a student, someone between jobs, or even a homemaker with some interest income, chances are, your annual income is below the taxable limit. You’re also likely to be wondering whether or not you should file an income tax return (ITR). 

The answer is yes. What you can file is a Nil ITR, which simply indicates to the tax department that you earned some income, was not high enough to be taxed. And while you are not legally required to file a Nil ITR, doing so has more benefits than you might think.

Who can file a Nil ITR?

If you are under 60 years old with an annual income below Rs 2.5 lakh under the old tax regime, or below Rs 3 lakh under the new tax regime, you are eligible to file a Nil ITR. If, after claiming eligible deductions under sections like 80C or 80D, your taxable income drops below this threshold, you can still file a Nil return.

Why you should file even if you don’t have to?

Here are some real and practical reasons to consider:

As proof of income

Applying for a loan or planning to travel abroad? Most lenders and visa authorities don’t just ask for salary slips but may also need proof that you have been filing your returns. Even if you aren’t earning much yet, a Nil ITR shows that you’re financially responsible and playing by the rules.

To claim a tax refund

Just because your income is below the taxable limit doesn’t mean tax hasn’t been deducted. Banks, employers, or clients may still cut TDS from your payments. The only way to get that money back is by filing your return.

To carry forward capital losses

If you’ve suffered losses in stocks, mutual funds, or crypto investments, you can carry that loss forward and adjust it against future gains. But, you can only do that if you report the loss by filing your return on time.

To smoothen visa applications

If you’re applying for a visa to countries like the US, UK, Canada, or parts of Europe, there’s a good chance you’ll be asked for copies of your past ITRs. Even students going abroad may face this. A Nil ITR is still valid and serves as formal proof of income and ties to India.

To maintain a healthy financial profile

Filing your ITR regularly, even when you don’t owe any tax, creates a track record. It keeps your PAN active, your tax history clean, and can be useful for future compliance, subsidy claims, or credit evaluations.

In case of high-value transactions

Even if your total income is below the exemption limit, you must file an ITR if you have: 

• Paid electricity bills exceeding Rs 1 lakh in a year.
• Deposited Rs 1 crore or more in a bank account in a year.
• Spent over Rs 2 lakh on foreign travel.

These fall under specific rules in the Seventh Proviso to Section 139(1) of the Income Tax Act that mandate filing. 

How to File a Nil ITR

• Access www.incometax.gov.in and select 'File Income Tax Return'.
• Choose the relevant ITR form (typically ITR-1) and enter your income and deduction details.
• Once zero tax liability is confirmed, submit your return.
• E-verify using Aadhaar OTP, net banking, or by mailing a signed ITR-V to CPC Bengaluru.

Filing a Nil ITR takes little time but can help you get refunds, build creditworthiness, and stay compliant. Even if you don’t need to file one, it’s often the smarter thing to do that smoothen your path into the future. 

(The author is the Senior Manager – Communications at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)