ITR filing FY 2024-25: Why filing Income Tax Return is important even if you have no tax to pay – explained

One key cause to file your ITR, even if you have no taxable earnings, is the power to carry ahead capital losses for future tax advantages. (AI picture)

By Surabhi MarwahITR filing FY 2024-25 (AY 2025-26: As the timeline for filing Income-tax Returns (ITR) approaches (September fifteenth for this FY, after extension), people, notably these whose earnings falls beneath the taxable threshold, in addition to Non-Resident Indians (NRIs) who don’t earn any earnings in India, typically ponder whether they’re required to file a tax return in India. The fact is, filing your return performs a vital position in varied elements of your monetary and authorized life.

The false impression of “No Tax = No ITR”

A typical false impression is – “If I don’t owe any tax, why should I file a tax return?” Let’s make clear a basic level – the Income-tax Act, 1961 (the Act) requires people to file tax returns if their gross complete earnings exceeds the fundamental exemption restrict earlier than claiming deductions. For Financial Year (FY) 2024-25, the edge below the outdated tax regime is INR 2.5 lakhs for people beneath 60 years of age (INR 3 lakhs for resident people aged between 60 and 80 years, and INR 5 lakhs for resident people aged above 80 years), and it is INR 3 lakhs below the brand new/concessional tax regime. This signifies that people whose earnings is not taxable on account of claiming the rebate are additionally required to file tax returns. However, this is simply the start line. There are many different conditions the place you should file an ITR even if you don’t owe any tax or your earnings is beneath the exemption restrict. This has been additional explained beneath.Also Read | ITR filing FY 2024-25: How can taxpayers change between outdated and new earnings tax regimes? ExplainedFor instance, Mr. A, earned INR 2.4 lakhs in FY 2024–25, primarily from pension and stuck deposits within the financial institution. Despite being beneath the exemption restrict, his financial institution deducted INR 6,000 as TDS on curiosity from fastened deposits. Filing an ITR is his solely method to declare a refund of this deducted tax.Carrying ahead of capital lossesOne key cause to file your ITR, even if you have no taxable earnings, is the power to carry ahead capital losses for future tax advantages. It is nevertheless crucial to notice that carry ahead of losses from home property usually are not allowed below the brand new tax regime. Imagine you incurred a loss from sale of shares throughout FY 2024-25. If you don’t file your ITR on time, these losses can’t be carried ahead to offset future capital positive aspects. Filing your return ensures these losses are offset with future capital positive aspects, making a foul funding 12 months doubtlessly work in your favour later.The significance of overseas asset reportingAnother essential cause to file returns, even with low or no earnings, is the requirement for overseas asset disclosure for people qualifying as Resident and Ordinarily Residents (ROR) in India Such people should report their abroad property below Schedule FA of the ITR varieties. Foreign property similar to financial institution accounts, monetary pursuits, ESOPs allotted below the employer’s abroad inventory incentive scheme, immovable property are to be reported whatever the earnings ranges. Failure to accomplish that can lead to penalties below the Black Money Act, 2015 and, even prosecution in some instances.Also Read | ITR e-filing FY 2024-25: What is the advantage of pre-stuffed ITR varieties on the earnings tax portal? Top factorsFor instance, Mr. A and his partner are joint house owners of a overseas property. In this case, each should report the asset of their respective ITRs. This joint possession requires cautious consideration to guarantee compliance, as failure to report can appeal to scrutiny from tax authorities.In current years, world info sharing has elevated below the Common Reporting Standard (CRS). ROR receiving overseas remittances or holding overseas property should guarantee compliance with tax laws. Skipping the filing of ITR to keep away from FA reporting is not solely dangerous however can be questioned. Tax authorities at the moment are geared up with automated trade of data mechanisms that present them with insights into overseas transactions/ overseas property, main to notices and requests for info. Therefore, it is essential for people to file their ITRs precisely and on time to keep away from penalties and guarantee compliance.Widened scope of necessary ITR filing below part 139(1) of the ActThe Act specifies varied standards for necessary tax return filing. Here are among the situations that require people to file ITR, regardless of their earnings ranges:

If you meet any of those standards, even if your earnings is beneath the exemption restrict, you are required to file your return.Also Read | ITR filing FY 2024-25: Do you want to file your earnings tax return if TDS has been deducted? ExplainedITR: Your Financial PassportIn as we speak’s world, ITRs have develop into important paperwork past tax compliance. Financial establishments, embassies, and even landlords view your return as a testomony to your credibility.If you plan to apply for a visa, particularly to international locations just like the US, UK, Schengen nations, or Canada, you will typically want to submit ITRs for the previous 2-3 FYs. Not having an ITR could lead on to delays or denials. Similarly, mortgage functions, whether or not for a house or automobile, are sometimes assessed based mostly on the earnings reported in ITRs, even if your financial institution statements look good. For instance, Priya, a freelancer, earned INR 2 lakhs in FY 2024-25. She didn’t file an ITR, pondering it was not crucial. Later, whereas making use of for a Schengen visa, her software was delayed as a result of she couldn’t submit ITRs from the final two FYs, one thing consulates typically anticipate, even with out taxable earnings.Also Read | Income Tax Return: What is Form 16? Top issues taxpayers ought to examine on this doc earlier than filing ITRIn conclusion, filing an ITR is greater than only a tax obligation; it is a method to set up your monetary presence, guarantee transparency, declare rightful refunds, and meet compliance necessities in an interconnected world. Whether you are a pensioner with TDS, salaried particular person with overseas shares acquired below an abroad ESOP plan, a pupil with abroad accounts, or a homemaker planning worldwide journey, your tax return can converse volumes when different paperwork can’t. Hence, it is important that you consider your state of affairs holistically to decide whether or not there is a requirement to file a tax return or not.(The creator, Surabhi Marwah is Tax Partner, EY India. Ammu Sadanandhan, Director- Tax, EY India and Ojaswita Pathak, Tax Professional, EY India additionally contributed to the article.)