Soumya Prakash Pradhan

Filing income tax returns is mandatory for every individual or entity earning income. However, when a business or individual has no income to report, they can file a Nil income tax return. Filing a Nil income tax return is a simple process that can be completed online.

Here, we will discuss how to file a Nil income tax return for a business using ITR-4.

Benefits of Filing ITR-4:

Filing an ITR-4 is necessary for freelancers, small businesses without registration, and service-based professions. Filing an ITR-4 can be beneficial in several ways. It can be used as proof of income while applying for credit cards, loans, or scholarships. Therefore, it is essential to file an ITR-4 even when the income is Nil.

Prerequisites for Filing Nil Income Tax Return:

To file a Nil income tax return, one needs to have an online ITR account. If you don't have an account, you can register on the Income Tax e-filing portal using your PAN details and mobile number.

Also, you will need a bank statement for the relevant financial year and a linked Aadhaar and PAN card.

You will also need to approximate your gross total income or turnover for the year, which includes income received in your account and expenses incurred to earn the income.

Important points to remember when filing ITR-4:

If you are filing a Nil income tax return, you should ensure that your gross income is not more than Rs 2.5 lakh. Moreover, filing a Nil return is a self-assessment-based filing. Therefore, it is advisable to file a return with an income below Rs 2.5 lakh in the first year and increase it gradually each year.

Follow these steps to file a Nil income tax return using ITR-4:

  1. Login to the Income Tax e-filing portal using your PAN card.
  2. Go to the 'e-File' section and click on the 'Income Tax' tab.
  3. Click on the 'File Income Tax' button and select the relevant assessment year.
  4. Select the mode of filing as 'Online' and click on 'Continue.'
  5. Click on 'Start New Filing.'
  6. Select 'Individual' in the 'Status' tab and click on 'Continue.'
  7. Choose 'ITR-4' as the return form and click on 'Proceed with ITR-4'
  8. Click on 'Let's Get Started.'
  9. Choose 'Other' in the 'Why are you filing this income tax' tab and click on 'Continue.'
  10. Select 'Nature of Business' and choose 'Other' as a freelancer.
  11. Click 'No' in the new tax regime and select 'Not Opting' if you have not claimed any deductions in the current year or 'Opting Now' if you have.
  12. Click on 'Next.'
  13. Skip the quiz on the 'Gross Total Income' page and click on 'Add Details' under 'Income from Business or Profession.'
  14. Click on 'Business' or 'Profession' tab based on your work.
  15. Enter your name and fill in the 'Gross Turnover' column with your earnings in the financial year. Add the cash income and under Section 44AD, add the capital amount, which is not deducted from the expenses. In the cash section, subtract the expenses and input the net amount (minimum 6%) and click on 'Confirm.'
  16. Complete the 'Gross Income' tab.
  17. Click on the new tab called Disclosure and Exempt Income.
  18. Go to the Financial Particulars of the business and click on "Add Details".
  19. Scroll down and select "Balance with Bank".
  20. Fill in the Financial Year's last month, the exact amount you have in your bank, and how much cash you have on hand. Fill in all other mandatory fields with zero.
  21. Click on the "Add" button.
  22. Click on the "Confirm" button to complete this tab.
  23. Ignore the "Total Deduction" tab as it is a nil return.
  24. Skip the "Tax Paid" tab as well.
  25. The last tab will appear as "Total Tax Liability". Fill in the details assuming that the gross income is below 2.5 lakhs, and therefore the tax liability is zero.
  26. After completing all the tabs, click on the "Proceed" button.
  27. In the next tab, review the summary of all the details provided.
  28. Click on the "Preview Return" button to generate the PDF of the ITR-4 form.
  29. Click on the "Proceed to Validation" button to check for any errors or mistakes.
  30. If there are any errors, fix them and proceed by clicking on the "Proceed to Verification" button.
  31. Verify your details by entering the Aadhaar OTP.
  32. Finally, submit the form and wait for the acknowledgement receipt.

Finally, when filling a nil return in ITR-4, ensure that the income shown is below 2.5 lakh. If the income is actually being shown, ensure that it is below 7 lakh to avoid paying any taxes. 

Meanwhile, it is always advisable to seek the help of a CA consultant to avoid any errors or mistakes.