In India, your tax liability can be zero while your Income Tax Return (ITR) filing remains legally mandatory.

The primary reason is that tax liability is calculated on Net Taxable Income (after deductions and rebates), whereas the mandatory filing requirement is based on Gross Total Income (before deductions).

The Income Tax Act mandates filing if your Gross Total Income (before applying deductions like Section 80C, 80D, or house rent exemptions) exceeds the basic exemption limit.

• The Scenario: Under the New Tax Regime, an income up to ₹12 lakh  incurs zero tax due to the Section 87A tax rebate. However, the basic exemption limit is only ₹4 lakh.
• The Rule: Because your gross income of ₹12 lakh is more than the ₹4 lakh boundary, you must file an ITR by law, even though your final tax bill is zero.

Under the 7th proviso to Section 139(1), you are required to file an ITR even if your income is completely zero or well below the exemption threshold if you meet any of these criteria:

• Electricity Bills: Spending more than ₹1 lakh on electricity consumption in a single financial year.
• Foreign Travel: Spending more than ₹2 lakh for yourself or anyone else on travel abroad.
• Bank Deposits: Depositing an aggregate of ₹1 crore or more in one or more current bank accounts.
• Savings Bank Deposits: Depositing ₹50 lakh or more across your savings accounts.
• If the total Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) on your transactions equals or exceeds ₹25,000 in a single financial year. For Senior Citizens (aged 60 years or older), this mandatory threshold is extended to ₹50,000 or more
• Business Operations: If your total sales, turnover, or gross business receipts exceed ₹60 lakh during the year, filing is mandatory even if the net profit is zero or a loss.
• Professional Services: If you are a professional (such as a doctor, lawyer, engineer, or consultant) and your gross receipts exceed ₹10 lakh during the financial year

If you are a resident individual in India, filing an ITR is mandatory regardless of your income level if you:

• Hold any asset outside India (like foreign stocks, property, or a foreign bank account).
• Have signing authority in any account located outside India.

Even if it is not legally mandatory for your specific numbers, filing a Nil ITR provides critical structural advantages:

• Claiming TDS Refunds: If a bank deducted Tax Deducted at Source (TDS) on your fixed deposits, or a client deducted TDS on freelance work, the government holds that money. You cannot get it back unless you file an ITR to claim your refund.
• Carrying Forward Losses: If you lose money in the stock market, crypto, or business, you can roll those losses over to offset future profits. This benefit is lost if you do not file your ITR on time.
• Visa Processing: Embassies for the US, UK, Canada, and Schengen zones require 2 to 3 years of ITR history to prove your financial ties to India.
• Loan and Credit Card Approvals: Banks treat your ITR as the official baseline proof of income. Without it, securing home loans, auto loans, or credit cards becomes difficult.