Why to File ITR even if Tax Liability is Zero?

It is necessary for people to file ITR even if tax liability is zero? The answer is No.

A person whose taxable income is below a limit, can avoid income tax return filing.

Such people can file IT returns voluntarily.

What is the limit below which, filing ITR becomes a voluntary requirement?

When taxable income is below the following values, ITR filing is not mandatory:


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  • Individual Taxpayer – Rs.2.5 Lakhs.
  • Senior Citizen (above 60) – Rs.3.0 Lakhs.
  • Senior Citizen (above 80) – Rs.5.0 Lakhs.

If they want they can do it, if they don’t want, they can avoid. It is perfectly legal.

But what is advisable?

Filing ITR should be practiced as a good habit. What are the benefits?

It makes one a more “responsible” citizen of India.

In return to this responsible act, the government gives a document which is “most useful”.

What is this document?

It is called ITR-V / Acknowledgement.

So coming back to our question, why to file ITR even if tax liability is zero?

File ITR to gain possession of this document called ITR-V/ Acknowledgement.

#1. What is ITR-V / Acknowledgement?

This is a one page document.

People who file their ITR online, get this document from the Income Tax department.

ITR-V stands for “Income Tax Return – Verification.

This document is a proof that the person has “paid income tax and filed the ITR online”.

This document can be used as a “proof of payment” of the due income tax to the government of India.

#2. What is the content of ITR-V / Acknowledgement?

Following details of the taxpayer appears in this document:

  1. Name.
  2. Permanent Account Number (PAN).
  3. Sex.
  4. Date of Birth.
  5. Income Tax Ward/Circle.
  6. Address.
  7. Total Income (as declared).
  8. Deductions (as declared / applicable).
  9. Tax Payable (as computed).
  10. Total Tax Paid.
  11. Tax Payable/Reful (as applicable) etc.

#3. What is the utility of ITR-V / Acknowledgement?

In common colloquial term, the ITR-V is called ITR Receipt.

ITR-V (ITR receipt) has several utilities.

In some cases, this is almost a mandatory document.

I personally know few freelancers, retired people etc, who file ITR even if their tax liability is zero.

We will list down few such utilities of ITR-V (ITR Receipt) here.

#3.1 Income proof for people not in job

People who are in job, get Form-16 from their employer.

But small businessmen, freelancers, retired people does not have Form-16.

ITR Receipt is that document which can be used in place of Form-16.

Moreover, ITR-V is a more detailed document as compared to Form-16.

In most cases, ITR-V is considered as the most authentic document for income proof. Why?

Because in this document there are following 2 details appearing in tandem:

  1. Total Income.
  2. Applicable tax computation based on income.

Considering that this document (ITR-V/Receipt) is generated by the income tax department, gives it a high level of authenticity.

#3.2 Necessary for Property Registration.

To register a real estate property in Registrar’s Office, submission of last 3 years ITR Receipt is almost mandatory.

A person who does not have ITR receipts of last 3 years may face some hurdles.

Hence it is advisable to keep ITR Receipt handy.

#3.3 Loan Disbursement Becomes Easy.

As soon as one will apply for bank loan, the first document that bank will ask is ITR Receipt.

Why they need this?

They need this document for 2 purpose:

  • To get a first impression about the applicant. Honest taxpayers are preferred for loan disbursement.
  • Using the ITR Receipt document, banks can fetch details like source of income etc.

The easier it is for banks to access one’s income data (with details), quicker will be the loan proceedings.

#3.4 To claim a tax refund.

A person whose tax liability is zero, why he/she will need a tax refund?

Yes, such cases do exists.

Suppose one generates income from the following sources:

  1. Rent.
  2. Payment received from Life Insurance Policy.
  3. Payment received from NSC.
  4. Income from Bank Deposits.
  5. Senior Citizen Savings Scheme (SCSS)
  6. Lotteries, games.
  7. Horse Race.
  8. Etc.

Such type of income attracts TDS (Tax Deducted At Source).

Suppose a person has annual income less than Rs.250,000.

But on his Fixed Deposit, the bank has deducted Rs.3,500 as TDS as per rules.

In this case, the person can claim a refund of the deducted TDS (Rs.3,500).

To claim the refund, ITR filing is mandatory.

Even if ones tax liability is zero, but to claim tax refund, one must file ITR.

#3.5 To get a Credit Card.

You must have noticed that, a newbie who has just been in job, finds it hard to get a credit card issued.

Why? Because they do have a Income Tax Payment (ITR) history.

The same condition may be applicable for even aged people.

Generally speaking, to avail any kind of loan/credit, submission of ITR receipt if almost mandatory.

#3.6 To get US/UK Visa.

Getting Visa for UK and USA is becoming quite troublesome these days (not for tourists).

This is more applicable for people seeking work-visa or Visas valid for longer durations.

In these cases, Visa authorities can make ITR Receipt mandatory for an individual. Why?

This is because, the issuing consulate would not like to issue Visa to a possible tax defaulter.

Conclusion…

One must file ITR more as a good habit.

What this habit will do, is to build a healthy history of the taxpayer at the income tax department.

Such a history (with zero defaults), is viewed favourable by the following authorities:

  • Credit card companies.
  • Loan issuing banks.
  • Visa authorities.
  • Property registration office etc.

It is strictly advisable for individuals to file ITR even if tax liability is zero in following conditions:

(1) Home Loan Interest Deduction – A person who is claiming deduction u/s 24 must file ITR.

(2) Income from more than one employer – A person who changed job, with a financial year will have 2 source of income.

It is advisable that such a person must file ITR even if the computed tax liability is zero.

(3) Interest earned from Savings Account / FD

In case, the cumulative annual interest earned on all deposits, is above Rs.10,000, ITR must be filed, even if the computed tax liability is zero.

It is always a good idea to keep ITR receipt copy handy.

Any person who is generating an income under his/her name, should take care to file ITR every year.

Disclaimer: All blog posts of getmoneyrich.com are for information only. No blog posts should be considered as an investment advice or as a recommendation. The user must self-analyse all securities before investing in one.

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