Filing a Nil income tax return shows that you are earning below Rs. 2.5 lakhs in an assessment year and therefore do not need to file income tax return.
A Nil return is filed when you didn’t pay tax because as an Indian citizen you did not earn beyond a taxable income. So, you are not legally bound to pay any kind of tax. However, it is not required to file a nil return as it is not mandatory at all but, it’s recommended as a nil return is helpful in several ways.
1. Authentic Proof of Your Income:
A Nil return serves as the legal document giving all the necessary details of your financial status. Besides, it is considered as a solid proof of income and is accepted by each and every financial institution.
2. To claim TDS refund:
If your bank has deducted tax deducted at source (TDS) on your interest income over Rs 10,000, despite the fact that your income is below the taxable limit, you can claim a refund only if you have filed a tax return. Also, in case your rental income is more than Rs 1.8 lakh in a year, your tenant is liable to deduct TDS. You will have to file a tax return for refund of TDS.
3. A Legal Proof while Applying for Loans:
Again a legal document while applying for the car, home loans etc. Bankers have a quite common practice of asking for the last three to five years of tax returns while granting any kind of loan. A nil tax return would help you out in such a situation.
4. Applying for VISA:
A nil return proves to be handy when it comes to VISA application as showing the proof of income is also a part of the whole applying procedure. For instance, it is compulsory to show the returns filed over the last three years while applying for Schengen Visa, even if you didn’t have any income.
5. To carry forward losses:
The only condition to carry forward losses is that you have to file tax return on time. If you file your income-tax return after due date which is generally July 31 of the year, you will not be allowed to set off your capital losses against capital gains in a belated return.
If suppose you’ve suffered any stock market loss and want to carry forward it to the next year. Moreover, regardless of the fact whether you are earning any income or not, you should realize the instances when to file a return
For example, you have incurred a loss suppose on sale of equity shares. To carry forward these losses for future adjustment with capital gains you must file tax returns.
Author : Hemant Dharnidharka. www.TheOnlineCA.com