Budget 2025: Will you have to file ITR even if tax liability is zero?
Union finance minister Nirmala Sitharaman announced that no income tax will be payable on income up to ₹12 lakh.
In a massive relief to the middle class, Union finance minister Nirmala Sitharaman announced that no income tax will be payable on income up to ₹12 lakh.
This limit will be ₹12.75 lakh rupees for salaried tax payers counting ₹75,000 of standard deduction. She also stated that the new income tax regime will be simpler, with a special focus on benefiting the middle class.
“To tax payers up to ₹12 lakh of normal income (other than special rate income such as capital gains) tax rebate is being provided in addition to the benefit due to slab rate reduction in such a manner that there is no tax payable by them,” Sitharaman told Parliament during her budget speech.
Is ITR filing mandatory?
While social media is buoyed over Sitharaman's announcements, a question everyone is asking on the internet: Do we still need to file an Income Tax Return (ITR) even if our taxable income is zero?
The answer is YES. You will have to file an income tax return.
Akhil Chandna, Partner, Grant Thornton Bharat, said,"As per provisions under the Income-tax Act, the tax return filing obligation arises based on Income level and not on actual tax liability payable. Even where the tax liability is NIL on account of rebate or various deductions, the taxpayer is required to file a tax return with NIL tax liability."
“This enables the government to expand the taxpayer base, including those who may not have any tax payable in any tax year. The exemption from filing tax return is applicable to only those whose income falls below the basic exemption threshold, i.e INR 400,000 under the new tax regime and INR 250,000 under the old tax regime,” Chandna added.
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Commenting on Sitharaman's announcement, Sohrab Bararia, Partner, Grant Thornton Bharat, said,"The revamped tax slabs under the new tax regime as introduced by the Finance Bill 2025, aim to provide significant relief to taxpayers by extending the reduced personal income taxes upto INR 1.10 lakhs. Under the new regime, individuals with an income of up to INR 12.00 lakhs, excluding certain incomes such as capital gains subject to special tax rates, would be eligible for a full tax rebate under Section 87A, resulting in zero tax liability.
“This overhaul replaces the previous system and proposes to significantly reduce tax burden, under which an individual paying INR 80,000 in taxes would now effectively pay nothing against a total income of INR 12.00 lakhs. Notably, the Finance Act 2023 had already established the new regime as the default framework,” Bararia added.
