Finance

Published: June 22, 2023
Updated: June 22, 2023

Benefits and Advantages of Filing Income Tax Returns (ITR) without Taxable Income

The Income Tax (I-T) Department has opened its portal for individuals to file their income tax returns (ITR) for the assessment year 2023-24. Many salaried individuals mistakenly believe that they don't need to file ITR if they don't have a tax liability. However, there are exceptions to this rule, and filing ITR is necessary even if the income is below the basic exemption limit. This article highlights the benefits and advantages of filing ITR, even when the taxable income is not applicable.

Mandatory Filing Requirements and Basic Exemption Limit:

It is important to understand that the tax laws mandate the filing of ITR if the gross total income in a fiscal year exceeds the basic exemption limit. For individuals below 60 years of age, the basic exemption limit for the assessment year 2023-24 is Rs 2.5 lakh, regardless of whether they fall under the old or new tax regimes. This requirement applies even if the individual's income is below the taxable limit.

Claiming Deductions and Refunds:

Filing ITR provides an opportunity to claim deductions and exemptions allowed by the government. These deductions and exemptions help reduce the overall tax burden and encourage individuals to fulfil their tax obligations. Even if an individual's income is below the taxable limit, there may have been tax deducted at source (TDS) by the employer. In such cases, filing ITR allows the individual to claim a refund of the TDS deducted. Similarly, if an individual has earned income through freelance work and TDS was deducted, filing ITR enables them to claim a refund.

Enhanced Loan Eligibility:

Filing income tax returns for the previous three years can greatly benefit individuals when they apply for loans in the future. Lenders such as banks and financial institutions often require proof of tax returns to assess an individual's financial position and repayment capacity. By maintaining a record of filed ITRs, individuals can demonstrate their financial stability and increase their chances of loan approval.

Legal Document and Proof of Income:

An important advantage of filing ITR is that it acts as a registered legal document. It serves as proof of identity and income, providing details of an individual's earnings and expenses. This document holds significant value in various official and legal matters, such as obtaining visas and establishing financial stability.

Visa Application Support:

Many countries require a history of filed ITRs when applying for visas. By consistently filing ITRs, individuals can showcase their financial stability and become more favourable candidates for visa approval. This demonstrates a responsible financial track record and increases credibility in the eyes of immigration authorities.

Tax Refunds and Loss Set-Off:

Even if an individual's annual income is below the taxable limit, filing ITR allows them to claim a tax refund or set off losses. For example, losses incurred from stock market transactions can be carried forward to subsequent years, reducing taxable income and potentially resulting in a refund.

Filing income tax returns, even without taxable income, offers several benefits and advantages. It enables individuals to claim deductions, obtain refunds, enhance loan eligibility, and provide a legal document for various purposes. Moreover, it strengthens financial credibility and stability, facilitating visa applications and demonstrating responsible financial management. Therefore, it is advisable to file ITR diligently, regardless of the tax liability, to avail oneself of these advantages and fulfill tax obligations.