TABLE OF CONTENTS: 1.Introduction 2.What is an Income Tax Return 3. Is ITR Filing Mandatory in each and every case? 4. Benefits of Filing ITR even with Low Or Nil Income With Practical examples 5. Conclusion INTRODUCTION Many People believe that ITR Filing is compulsory only when they have taxable income (i.e. income more than basic exemption limit). Myth is that if their annual income is less than basic exemption limit i.e. Rs. Rs. 250,000 (Old Scheme) Or 4,00,000 (New Scheme), they do not require to file income tax return, but this is one of the biggest misconceptions among taxpayers because filing ITR have several financial and legal benefits even if your income is less than basic exemption limit or you have Nil income. Firstly, if you file ITR even if your income is less than basic exemption limit, it indicates that you are a responsible citizen. Besides this, filing ITR have several financial benefits such as claiming tax refunds, maintaining proof of income, creating strong credit history, improving chances of getting loans and Visa, for carrying forward of Capital Loss and certain business Losses, Showing financial records in ITR, For calculation of deferred tax asset (DTA) and deferred tax liabilities (DTL).   What is an Income Tax Return (ITR) Income Tax Return (ITR) is a form that a taxpayer (Individual, Firm, company, LLP, Others) file to the Income Tax Department to report income earned during financial year, to claim deductions and exemptions under income tax act, to calculate their total tax liability, to claim refund if they have paid extra advance tax or self-Assessment Tax or have been deducted TDS or TCS on purchases. In short, we can say that ITR is a financial report card that individual and entities use to declare income and taxes paid to the income tax department during a financial year. Is ITR filing Mandatory in each and every case? No, But exact answer depends on several factors, such as whether you are an Individual, a company or a partnership firm or any other specified entity, as well as ITR filing compulsorily also depends on your total income/Turnover in case of individual, companies, firms etc. in a particular financial year.  If you are a company or a firm (including LLP), it is mandatory to file income tax return even if total income is zero or Nil. However, if you are an Individual having gross total income (i.e. total income without giving effect of SECTION 82, 83, 84, 85, 86 and deductions under chapter VIII) is less than basic exemption limit than it is not mandatory to file income tax return, but there are exemptions given under Income Tax Act, 2025 under section 263(1) and rule 163 in which filing ITR is mandatory even if income is less than basic exemption limit. Section 263(1): If any person who is resident and is beneficial owner of asset located outside India or having any foreign source of income, ITR filing becomes necessary in all cases. Rule 163: Conditions to be fulfilled for compulsory filing of ITR: Benefits of filing ITR with no income or NIL income with practical examples: 1. Act as proof of income: If an individual file income tax return even if there is low income or NIL income, it serves as a proof of income. Many banks, financial institutions and embassies consider ITR as a reliable document for calculating total income. Example – A person has total income of 2,49,000 in a financial year which is below the taxable limit. Two years later, he wants to apply for personal loan from bank.  In this case bank asks for last two years income tax return, since he had filed all his ITR’s on time, the loan processing become smoother. Example – Two self-employed individuals earn almost the same income. One files ITR every year, while the other never files because his income is below than basic exemption limit. When both apply for home loan, the person who filed ITR consistently will get loan easier. 3. Essential for Visa Application by Embassies: Many countries ask applicants to submit ITRs while processing visa applications. It helps embassies to consider whether person applying for visa has genuine source of income or not. 4. Strong Credit History in Cibil: When an individual wants to apply for credit card, bank asks for income tax return as a proof of income to assess financial credibility. Regularly filing of Income Tax Return also helps to increase your credit score. 5. Helps carry forward certain Losses: If an individual incur losses from business, profession, capital losses, timely filing of income tax return allow you to carry forward those losses and set off those losses against future income/gains. Example: A person earns a salary of Rs. 300,000 in a financial year which is less than basic exemption limit under new regime and he has invested some part of his salary in share market and mutual funds. He sold all these shares and has incurred a loss in this financial year. In next financial year his total salary increases and he starts falling over taxable slab limit. In this case, if he had filed ITR in the year in which he has incurred losses and had carried forward losses then he can set off that loss against next year’s taxable income. 6. For calculating Deferred Tax Asset (DTA) and Deferred Tax Liability (DTL): Deferred tax asset and liability is computed by comparing profit as per accounting records and income as per income tax act. ITR helps to determine DTA/DTL when; * Depreciation claimed under income tax act. *Brought forward business losses and unabsorbed depreciation is calculated. * Deductions claimed under various sections. *Calculated Taxable income after all adjustments. These values are compared with accounting records to identify timing differences and determine Deferred tax asset and Deferred tax liability. Example: – Depreciation in accounting records = 1,00,000 -Depreciation allowed in ITR = 1,50,000 -Suppose, Tax rate is 30% only Since tax depreciation is higher in

Financial market offers different investment opportunities one of them is future and options. Future and options are derivative contracts and gets its value from underlying asset such as stocks, commodities (gold, silver etc.), currencies. For example:  A stock is trading at Rs. 1000 We buy one future contract at Rs. 1000 A) Let’s assume stock price rises to Rs.1100          Then our gain is Rs.100     Then our loss is Rs.100 2. Options: – Options give buyer a right to buy or sell an underlying asset at a future date, but not an obligation. However, if the buyer exercises his option, it becomes an obligation for the seller. A buyer pays a premium to acquire the right. Options have two types: – For example: – We buy a call option with a strike price (deal price) = Rs. 5000 Premium= Rs.50 Lot size = 100 Total premium paid = Rs.5000 Case A – Market price = RS.6000 Now we will exercise our right Profit = (6000-5000-50)100 = Rs. 95000 Case B – Market price = Rs. 4000 Since there is a decrease in price we will not exercise our right. Therefore, our loss = premium paid only = Rs. 5000 (50*100). For example: – Current Reliance price = Rs. 3000 We buy put option Strike price (deal price) = Rs. 3000 Premium = 100 Lot size = 50 Premium paid = Rs. 5000 Case A– Market price = Rs. 2000 We will exercise our right As a result, our profit will be (3000-2000-100)50 = Rs.45000 Case B– Market price = Rs. 4000 Since there is an increase in price, we will not exercise our right Therefore, our loss = premium paid only = Rs. 5000 Nature of income: – Loss from future and options is treated as non- speculative business loss under Income tax Act from 1st April, 2006. Carry forward period: – It can be carried forward for 8 assessment years immediately succeeding the assessment year in which the loss was incurred. Set- off rules: – Miss Prachi CA Mandeep Singh