What is Nil ITR Filing and How to File It?

Did you know that filing a nil income tax return can be useful in getting a refund on your ITR? If you don't know about nil income tax returns, here is your chance to learn about it.

If your income is less than Rs. 2.5 lakh a year, your tax liabilities are zero, and you don’t have to pay any income tax. In that case, if you file an ITR, it is called a ‘nil return’. Although it is not mandatory to file an ITR when your income is below Rs. 2.5 lakh, there are many benefits of filing a nil return. In this article, we delve into the topic of filing a nil ITR and why it may be helpful for individuals, especially those who have recently started to earn income.

Read more about Required Documents for ITR Filing

What Is a Nil Tax Return?

Nil tax returns refer to tax filings where individuals report non-taxable income or financial activities within a period. Nil ITR filing applies to anyone whose annual income is below the income tax threshold of Rs. 2.5 lakh per year. It implies that the individual or business has not generated income above the taxable level to report.

It is not mandatory to file nil income tax returns. However, doing so is crucial for compliance requirements, transparency, and record-keeping. It helps authorities monitor and verify the financial activities of taxpayers accurately.

When Can You File It?

When you are just starting to earn but your annual salary is below the income tax threshold of Rs. 2.5 lakh, you can file nil returns. Filing ITR is mandatory if you own a foreign asset, even if your annual income is below Rs. 2.5 lakh

What Is Nil Return in GST?

If you are a company, then filing a GST nil return is mandatory. All regular and casual taxpayers, including SEZ units and SEZ developers, must file a GST nil return. GST nil return filing is compulsory for all businesses under the following circumstances:

  • There are no outward supplies during the month or quarter in which the tax is charged
  • It includes tax calculated on a reverse charge basis, zero-rated supplies, and deemed exports
  • When there are no changes in the supplies declared in an earlier return
  • There are no credit or debit notes to declare or announce during the filing period
  • No advances received, announced, or adjusted for the period 

How to File Nil Tax Returns?

The e-filing process for a nil income tax return is similar to filing regular tax returns.

 Here are the steps to file your nil income tax return online:

  • Visit the Government of India’s Income Tax website.
  • Login to the e-filing facilitator portal along with mandatory validations like Aadhar, PAN card, and Form-16.
  • Fill up your personal details.
  • Enter the financial details: salary and deductions for the tax calculator.
  • The portal will estimate the tax. The result will show that you have incurred no tax for the tenure.
  • In the next step, add your investment details to claim deductions. 
  • Once done, submit the completed return to the Income Tax Department.
  • You need to download and sign the ITR-V acknowledgement form and send it to the CPC in Bangalore as the last step to complete the e-filing process within 30 days of your ITR filing.

How to File Nil GSTR-1 on the GST Portal?

Here is a step-by-step guide to filing the nil return in GST online on the GST portal:

  • Login to the GST portal for e-filing 
  • Click on the Services dropdown and select ‘Returns Dashboard’ 
  • Select the month and the year of filing from the dropdown
  • Click on the ‘Prepare Online’ option under the GSTR-1 filing 
  • Click on the option stating ‘Generate GSTR-1 Summary’
  • ‘Preview’ the file before submitting and check the adjacent checkbox to acknowledge that the details are correctly filled 
  • Click on ‘Submit’ 
  • You can choose to file either with DSC (Digital Signature Certificate) or EVC (EVC)) 

Benefits of filing nil income tax return

Irrespective of your income, ITR filing is a good practice that ensures multiple benefits:

Serves as income proof: It serves as proof of income, an important document required in many instances, from processing your passport to applying for a visa, and proving your current income status. By filing nil income tax returns, you can create a trail of records for your income and use it as income proof.

Maintain records: If you are already filing an ITR and your income has fallen below the threshold for 1 year, you may still file a nil return. It will help you maintain records and prevent any scrutiny from the Income Tax Department.

To carry forward losses: If you invest in the stock market and incur losses during any financial year, you can adjust the loss to the subsequent year. But it is only possible when you file the ITR regularly, even when there is no taxable income to report.

To claim a refund: Filing your tax returns is necessary for claiming IT refunds when you are eligible. For instance, you can claim a reimbursement for the TDS deducted above your limit.

Example: In some transactions, tax is deducted at source, like banks deduct tax on interest payments of over Rs. 10,000 a year. If your income is below the tax threshold, you can claim a refund on the deducted amount. If the tax is collected incorrectly, you will also receive interest of 0.5% on the amount for all the months the tax was charged. Filing an ITR is the best way to substantiate your claim. 

Final Words 

Nil ITR filing is not mandatory for individuals with income below Rs. 2.5 lakh annually, but it offers many benefits. You may want to reconsider your stance if you have not filed your tax return yet. It is good practice and helps you create a track record for yourself. 


If my income is less than Rs. 2.5 lakh a year, do I still need to file an ITR?

ITR filing isn’t mandatory for individuals with income below the exempted threshold of Rs. 2.5 lakh per year, but it is still a good practice that offers multiple benefits. You can file a nil ITR when you have no taxable income to declare.

What is the time limit given for taxpayers to file a nil ITR?

You must file the ITR within the due date specified under Section 139(1) of the Income Tax Act. Delays in filing ITR will attract penalties per the Finance Act 2017 amendments.

Is it optional for companies and businesses to file nil tax returns?

No, companies must file tax returns irrespective of profit or loss.

What is the penalty for failing to file tax returns?

As per the Finance Act 2017 amendments, a penalty of Rs. 5,000 is charged if the taxpayer files an ITR between 31 July and 31 December of the relevant AY. If the ITR is filed between 1 January and 31 March, the penalty increases to Rs. 10,000. However, if the taxpayer’s income is below Rs. 5 lakh a year, the maximum penalty collected is Rs. 1,000.

How do I file a nil income tax return?

The method to file a nil ITR is the same as for filing an ITR. You’ll have to log in to the e-filing portal for the income tax filing and update your salaries and deductions. The system will calculate zero tax liabilities. To complete the process, you must download and send the signed acknowledgement copy to the CPC in Bangalore within 30 days of e-filing.