Do You Need to File ITR If No Income Tax is Payable? Know ITR Filing Rules
Filing an Income Tax Return (ITR) is a common concern for many taxpayers, especially those whose tax liability is zero due to deductions or rebates. Recent announcements in the Budget 2025 by Finance Minister Nirmala Sitharaman provide significant relief for middle-class taxpayers, ensuring no tax liability for individuals earning up to ₹12 lakh annually. But does this mean that you are exempt from filing an ITR? Let’s break it down.
Understanding the ITR Filing Rule
Filing an ITR is not based solely on whether you owe tax or not. Instead, it depends on your income level. As per current rules:
- Individuals earning more than ₹2.5 lakh annually under the old tax regime or ₹4 lakh under the new tax regime are required to file an ITR.
- This rule applies even if deductions or rebates, such as the new ₹75,000 standard deduction, reduce your tax liability to zero.
What the Budget 2025 Changed
In her Budget speech, Sitharaman announced that taxpayers earning up to ₹12 lakh annually will not pay any income tax, thanks to tax rebates and slab rate reductions under the new regime. Salaried individuals with incomes up to ₹12.75 lakh also benefit from the ₹75,000 standard deduction, effectively making their tax liability zero.
However, these benefits do not exempt individuals from filing ITR if their income exceeds the basic exemption limits.
Why File ITR Even If Tax is Zero?
Filing your ITR, even when no tax is payable, is often recommended by financial experts. Here’s why:
- Maintaining a Clean Financial Record: Filing ITR ensures your income is documented, which can be essential for securing loans, visas, or credit cards.
- Claiming Refunds: If excess tax has been deducted from your income, filing ITR helps you claim a refund.
- Avoiding Penalties: Not filing ITR when required can lead to penalties, even if you don’t owe any taxes.
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Who Must File ITR?
Beyond the basic exemption limits, ITR filing is mandatory for individuals under certain conditions, including:
- Owning foreign assets.
- Depositing more than ₹1 crore in a bank account.
- Incurring electricity bills exceeding ₹1 lakh annually.
- Traveling abroad with expenses over ₹2 lakh.
In summary, while Budget 2025 provides substantial tax relief, it does not exempt taxpayers with zero tax liability from filing ITR if their income exceeds specified limits. Filing ITR is not just a legal obligation—it’s a good financial practice that can help in various ways, from maintaining a strong credit profile to enabling hassle-free financial transactions.
