Meaning of Nil Tax Return.


According to the e-filing website of the Income Tax Department of India, registered taxpayers grew by 15% to around 8.45 crore on 31st March 2019. This indicates a steady rise among individuals who are willing to file their income tax return at the end of a financial year. 

If your annual income is less than Rs.2.5 lakh per annum, you are not liable to file income tax returns. However, you can still opt to file a return, for the sake of creating salary receipts, known as a nil tax return.

What is a nil tax return?

A tax return that is filed by individuals who are not required to pay taxes, as their annual income is below the income tax slab, is referred to as a nil tax return. Individuals who file nil tax returns are declaring to the Income Tax Department that they have earned nil or low income for the respective financial year. It is not mandatory to file a nil income tax return; however, it helps primarily in maintain financial records even though your annual income is not taxable. 

When should anyone file a nil income tax return?  

There are several situations for which filing nil income tax returns is beneficial for an individual.

These are –

  • Proof of income

During your home loan application process, you need to provide a proof income besides your salary slip in order to meet the demands of the eligibility criteria set by your lender. In such cases, if you have an annual income which is not taxable, you can opt for a nil income tax return, which will act as an official proof of income document. This proof of income also comes in handy during application of a passport or visa. 

  • Claim refunds

Taxpayers need to file an income tax return to claim a refund if they paid more taxes than the required amount. This generally happens when financial institutions deduct tax at source even if the annual interest or principal income is below the income tax slabs as set by the Income Tax Department. In such cases, you are eligible for a refund, which can be claimed easily with the help of nil tax returns.

How to file a nil tax return?

Just like regular filing of income tax return, you can file a nil tax return through an easy online application process. 

This application process consists of the following steps –

  1. Visit the official e-filing income tax website and log in with your PAN details and registered password. 
  2. Navigate to the ‘E-filing’ option and click the same. Enter all details as necessary, and your income tax will be calculated automatically.
  3. Since you are filing a nil income tax return, there will be no tax dues. 
  4. Click on ‘Submit’ to end the online nil tax return filing process.