Income below tax slab? Filing an ITR still pays off in ways you didn't know

Filing an ITR isn't just for paying taxes, it's a powerful tool for building financial credibility, accessing loans, securing subsidies, and opening doors to major opportunities, even with no tax due

Should you file an income tax return (ITR) even if your annual income is under the basic exemption limit?  Financial experts believe the answer is a clear yes, not for tax liability, but for financial foresight. It helps build a formal financial footprint.

 

A lost advantage if you don’t file

 

“Not filing an ITR even if you’re earning below the taxable threshold is a lost advantage,” said Vishwanathan Iyer, Senior Associate Professor of Finance and Accounting at Great Lakes Institute of Management, Chennai.

 

“It’s no longer just a compliance measure, it’s essential to establishing financial credibility and showing foresight.”

 

Amit Bansal, partner at Singhania & Co., echoes the sentiment.

 

“Filing an ITR helps establish a financial record with the government and builds credibility with financial institutions. In today’s digitised economy, a consistent ITR history may serve as a valuable asset in the long run,” he said. 

 

What you gain from filing ITR voluntarily

 

According to both of the experts, voluntary ITR filing comes with several advantages, even if you have zero tax liability:

 

• Proof of income for freelancers, gig workers, and business owners 
• Visa applications for countries like the US, UK, and Canada, where ITRs are often required 
• Loan approvals, banks and NBFCs typically ask for 2–3 years’ ITRs for large loan processing 
• Claiming TDS refunds, especially on fixed deposits or freelance earnings 
• Eligibility for subsidies and grants under government schemes 
• Reduced scrutiny, a valid ITR can justify high-value financial transactions

 

Consequences of skipping it

 

While not filing may not draw penalties for incomes below the exemption threshold, the consequences often emerge later. 

Visa applications, especially to Schengen countries or the US, commonly require ITRs for the past 2–3 years.

 

“Applicants without returns face delays or outright rejection,” Iyer explains. Similarly, banks ask for ITRs to assess long-term repayment capacity for loans above ~30–40 lakh.

 

Even in personal matters such as buying property or accessing MSME schemes, the absence of ITRs can stall progress. More critically, the Income Tax Department may flag large financial transactions if no ITR is available to explain them. 

 

What the tax department says

 

According to the Income Tax Department and Central Board of Direct Taxes (CBDT), individuals with income below ~2.5 lakh (~3 lakh for senior citizens) are not legally required to file returns. However, Rule 12AB mandates filing in specific high-value cases, such as:

 

• Deposits over Rs 1 crore in a bank account 
• Spending above Rs 2 lakh on foreign travel 
• Electricity bills over Rs 1 lakh annually

 

The CBDT, in various awareness drives, has also emphasised the long-term benefits of voluntary filing, especially in the context of a more digitally monitored financial system.

 

“Filing an ITR is not just about paying taxes, it’s about putting your financial footprint on record,” Bansal noted.