ITR Filing: Should Salaried Professionals Need To File ITR With No Tax Liability?

The Income Tax Returns (ITR) for income received in FY 2022-2023 must be filed by July 31, 2023. ITR filing will begin on April 1 as well, marking the beginning of the new assessment year. From April 1 to July 31, taxpayers can file their ITRs for the income they received in FY 2022-23. After July 31, the person will need to submit a delayed ITR, which will be subject to penalty. Salaried employees will receive Form 16 from their employers by June 15, but as the July 31 filing deadline draws near, there is growing uncertainty regarding the need to file income tax returns for the assessment year 2023-24 or the financial year 2022-23. Several individuals who have basic incomes below the taxable threshold wrongly think they won't have to submit tax returns for the calendar year ending March 2023. To find out if this is true, we spoke with our financial experts and have piled up the answers below.

Swati Jain, CA & Strategic Business Advisor, Arihant Capital Markets Ltd

Filing your Income Tax Return (ITR) is not essential but also holds numerous advantages, even if you have no tax liability. While it may seem optional, here's why you should consider filing your ITR:

a. Claim Tax Refund: You might be eligible for tax refunds due to excess TDS or deductions. Filing ITR helps you claim these refunds and put money back in your pocket.

b. Loan Approvals: It can help you improve your credit score. Banks and financial institutions often require ITR as proof of income. By regularly filing your ITR, you establish your financial credibility, making it easier to obtain loans and credit.

c. Capital Loss Carryforward: Capital losses incurred in a particular year can be carried forward to offset future capital gains. Filing ITR is crucial to ensure these losses are accounted for and can be utilized in the future.

d. Visa Applications: Several countries require ITR as part of the visa application process. By maintaining a consistent ITR filing history, you enhance your chances of visa approval and demonstrate financial stability.

e. Owning Foreign Assets: If you plan to invest in or own foreign assets, filing ITR becomes necessary. It serves as proof of your income and helps fulfill compliance requirements when dealing with international investments.

Remember, filing ITR showcases your financial responsibility and provides a comprehensive financial snapshot. Additionally, even if you have no tax liability, you are obligated to file your IT returns in certain scenarios outlined by the income tax department, including (but not limited to):

1. If you have spent more than Rs 2 lacs towards foreign travel

2. If you have incurred expenses on electricity over Rs 1lac in the previous year

3. If you have made deposits of more than Rs 1 crore in all current accounts taken together or more than Rs 50 lacs in all saving accounts taken together.

4. As a resident Indian, if you have a beneficial interest in any foreign asset whether movable or immovable.

5. If you have paid any tax on your income in a foreign country. You may be required to file an ITR in India to claim a deduction for the tax paid in the foreign country.

6. If you are a director or partner in a company or a firm. You may be required to file an ITR even if your income from the company or firm is below the basic exemption limit.

7. If you have deposited more than Rs 50 lacs in a savings bank account during the financial year.

Suresh Surana, Founder, RSM India

In accordance with Section 139 of the Income Tax Act, 1961 (hereinafter referred to as 'the IT Act'), every salaried taxpayer whose total income (before allowing any deductions under Chapter VI-A and other specified exemptions) exceeds Rs 2.5 lakhs in any financial year would be mandatorily required to furnish their tax return. Such threshold limit of Rs. 2.5 lakhs would be enhanced to Rs 3 lakh in case of resident senior citizens aged 60 years and above and Rs 5 lakhs in case of resident super senior citizens aged 80 years and above. Thus, a salaried professional whose income exceeds the above threshold would be required to furnish their tax return.

Further, irrespective of the aforementioned threshold limits, furnishing of return would be mandatory in some cases, such as:

Ø The taxpayer holds, as a beneficial owner or otherwise, any asset (including any financial interest in any entity) located outside India or has signing authority in any account located outside India

Ø The taxpayer is a beneficiary of any asset (including any financial interest in any entity) located outside India

Ø The taxpayer has to claim income tax refund or has to carry forward any loss

Ø The taxpayer has deposited amount or aggregate of amounts exceeding Rs. 1 Crore in one or more current account during the financial year

Ø The taxpayer has incurred expenditure of an amount or aggregate of amount exceeding Rs. 2 lakhs for travel to a foreign country for himself or for any other person

Ø The taxpayer has incurred expenditure of amount or aggregate of amount exceeding Rs. 1 lakh on consumption of electricity during the financial year

Ø In case the taxpayer's total sales, turnover or gross receipts, as the case may be, in the business exceeds Rs. 60 lakhs or in case the taxpayer's total gross receipts in profession exceeds Rs. 10 lakhs during the financial year.

Ø If the aggregate of TDS and TCS during the financial year, in the case of the taxpayer, is Rs. 25,000 or more

Ø The deposit in one or more savings bank account of the taxpayer, in aggregate, is Rs. 50 lakh or more during the financial year

Avinash Shekhar, CEO and Founder, TaxNodes

As responsible citizens, it is important for salaried professionals to fulfill their legal obligations, including filing income tax returns, even when they have no tax liability. By doing so, they contribute to the transparency and accountability of the system, ensuring that their financial records are properly documented. Additionally, filing ITR allows individuals to establish a clear financial history, which can be beneficial in the future for various purposes such as obtaining loans, visas, or even applying for government schemes. It is a way to showcase one's financial discipline and integrity while demonstrating a commitment to compliance. Therefore, regardless of the tax liability, filing ITR is a crucial step towards upholding the principles of good governance and promoting a fair and just taxation system in India.

Amit Gupta, MD, Sag Infotech

The confusion surrounding the filing of income tax returns for the assessment year 2023-24 or the financial year 2022-23 is increasing among salaried employees as the deadline for filing, July 31, 2023, approaches. Some individuals who earn a basic income that falls below the taxable category mistakenly believe that they don't need to file tax returns for the year ending March 2023, but this is incorrect.

According to experts, if tax deducted at source (TDS) has been taken out of an employee's salary and their annual income is below the threshold limit, they must still file an income tax return to receive a refund. Even if the net income, which includes income from all sources, is below the threshold limit but investments such as mutual funds, stocks, and fixed deposits are present, individuals must file an income tax return if the net income exceeds the threshold limit.

Although an individual may not have any tax liability due to various deductions and rebates, they may still need to file an income tax return if the sum of all taxable income exceeds the prescribed threshold. For example, if the income is below 5 lakhs and does not include long-term capital gains on listed shares and equity funds, there may not be any tax liability but the individual still has to file an income tax return.

Various deductions provided by Chapter VIA, including Sections 80C, 80CCD, 80D, 80G, 80TTA, 80TTB, etc., should be considered when determining income for tax filing purposes. These deductions cover expenses such as life and health insurance premiums, bank interest, contributions to EPF, PPF, and NPS accounts, and tuition fees for children.

The basic exemption levels for income tax filing are 2.50 lakh for individuals under 60 years old, 3 lakhs for those between 60 and 80 years old, and 5 lakhs for individuals older than 80. Even if the total taxable income exceeds the threshold level and there is no tax liability due to deductions and rebates, individuals may still be required to file their income tax returns.

Sathvik Vishwanath, Co-Founder & CEO, Unocoin

Yes, salaried professionals should file their Income Tax Return (ITR) even if they have no tax liability. Filing ITR has several benefits, even if there is no tax to be paid. First, it helps to maintain a clear and accurate record of income and taxes paid, which can be useful for future financial planning and loan applications. Second, it facilitates compliance with tax laws and demonstrates one's commitment to fulfilling their obligations as a responsible citizen. Lastly, filing ITR can also serve as proof of income for various purposes such as visa applications, loan approvals, and rental agreements.

Raghuram Alukur Trikutam,CEO, Descrypt

Salaried professionals in India are provided a Form16 by their respective organizations which captures the TDS that an organization would have paid. Along with that, most professionals invest in Mutual Funds, Stocks, Crypto, Real Estate, etc. which lead to either short term or long term capital gains. This leads to a tax liability for the professional which is one of the major reasons for them to file their tax returns. To top it, even in the absence of any investment in the instruments mentioned, a individual needs to file their returns for potential TDS returns and benefits. To top it, filing returns on taxes even where there is no liability helps maintain a transaparent record and a historic journal with the IT department. Overall, it is highly advisable that salaried professionals earning in any of the tiers do file their tax returns.

Aashika Jain, Financial Expert and Editor, Forbes Advisor India

Yes, every salaried professional must file their income tax return with no tax liability to ensure income from other sources are well-accounted for and if exceeds the threshold limit, it may end up sum totally for a tax.

Pratik Vaidya, MD & CVO, Karma Global, a tech enabled HR & Compliance Organisation

If your income under all heads, including salaries, is above the basic tax exemption limit, you are required to pay tax irrespective of whether your employer deducts any tax or issues a Form 16 or not.

On salaried professionals filing a Nil return or not, if any individual's income is below 2.5 lakhs in a financial year, the tax liability is zero and no filing of an income tax return is required. However, if you do file ITR even when your income is below 2.5 lakhs, this will be treated as "Nil Return "which is not mandatory.

Some basic facts to be kept in mind :

(1) sometimes your return may exceed 2.5 lakhs in a financial year, however, if the rebate or exemptions, reduces the liability to zero, this will be treated as a nil return.

(2) You have been filing returns for many years and in this current year, your income falls below the taxable limit, continue filing nil return for maintaining a record as a preventive measure for eventual scrutiny if any.

Benefits of nil return are

(1) TDS refund

(2) proof for visa and passport application

(3) loan application

(4) individuals owning foreign asset

(5) carry forward losses.

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