Union Budget 2025: ITR filing still mandatory for income above exemption limits

Finance Minister Nirmala Sitharaman on Saturday announced significant relief for middle-class taxpayers, stating that individuals earning up to Rs 12 lakh annually will no longer have to pay income tax. In her Budget speech, Sitharaman clarified that taxpayers earning up to Rs 12 lakh, excluding special income like capital gains, will receive a tax rebate in addition to reductions from the new tax slab rates, ensuring no tax liability for them.

Also Read: Union Budget 2025: FM announces major personal Income Tax reforms, nil tax for up to Rs 12 lakh

Furthermore, under the new income tax regime, a standard deduction of Rs 75,000 has been introduced, meaning salaried individuals earning up to Rs 12.75 lakh will also have zero tax liability. However, this raises a key question: Are individuals with zero tax liability exempt from filing income tax returns (ITRs)?

The answer is no. Filing ITRs remains mandatory for individuals whose income exceeds the basic exemption limit, which is Rs 2.5 lakh under the old regime and Rs 4 lakh under the new regime. Tax experts emphasize that ITR filing requirements depend on income levels, not the actual tax liability. Therefore, even if a person’s tax liability is zero due to rebates or deductions, they must still file a return showing nil liability.

Experts also recommend filing ITRs even with zero tax liability, as it helps maintain a clean financial record and could be advantageous when applying for loans, visas, or other financial services.