ITR filing 2026: If your tax liability is nil after Section 87A rebate, should you still file a return?

If your tax liability becomes zero after claiming the Section 87A rebate, you may assume that you no longer need to file an income tax return (ITR). However, the rebate only reduces the amount of tax you have to pay if you are eligible, it does not automatically exempt you from filing your return.

Whether you need to file an ITR or not largely depends on your gross total income and the filing rules that apply to you. Apart from that, filing a tax return can also be useful if you want to claim a tax refund, carry forward certain losses or maintain proof of income for loans, visas and other financial purposes.

Who needs to file ITR?

ITR filing is mandatory if an individual’s income crosses the specified threshold. The tax rebate under Section 87A is applicable only when you file your tax return, meaning even if your income is eligible for a rebate, your tax will not be considered nil until you actually file the ITR and claim it.

The requirement of filing tax return depends on your income and which tax regime you are opting. An individual must file an ITR if their income from all sources during a financial year exceeds the amount of basic exemption limit, even if their final tax payable is zero.

The basic exemption limit under the old tax regime is ₹2,50,000 for individuals below 60 years of age, ₹3,00,000 for senior citizens (60-80 years of age) and a higher exemption of ₹5 lakh for those who completed 80 years of age (super senior citizens).

Meanwhile, under the new tax regime, the basic exemption limit is ₹4,00,000 for all individuals, post which taxes apply.

Deductions must be excluded to evaluate ITR filing threshold

While determining whether you are required to file an income tax return based on your income for the year, the relevant figure should be your gross total income before claiming deductions under Chapter VI-A.

This means deductions under Sections 80C, 80CCD, 80D, 80G, 80TTA, 80TTB, and other similar provisions of the Income-tax Act are not considered while checking the filing threshold of the taxpayer.

Similarly, any exemption available on long-term capital gains should also be excluded when determining your obligation to file an ITR.

What is Section 87A rebate?

Section 87A provides a tax rebate to eligible individual taxpayers under the new tax regime, allowing them to reduce or even eliminate their income tax liability if their income falls within the prescribed limit.

For financial year 2025-26 (AY 2026-27), taxpayers with a taxable income of up to ₹12 lakh can claim the Section 87A rebate, effectively reducing their liability to nil. In addition, salaried individuals opting for the new tax regime can claim the standard deduction of ₹75,000. For the old tax regime. the deduction applicable is ₹50,000, according to income tax department’s website.

This means, a salaried individual with a gross income of up to ₹12.75 lakh may still end up paying no income tax, provided they meet the eligibility conditions.

What happens if don’t file ITR in such cases?

Under section 234F of the Income Tax Act, taxpayers must pay a late‐filing penalty if they fail to file their ITR on time. The amount depends on the person’s total income and the time of filing.

For the assessment years 2025‐26 and 2024-25, taxpayers with an income of ₹5 lakh and less will have to pay a ₹1,000 penalty if they miss the due date but pay before 31 December. For people with an income or more than ₹5 lakh, the penalty is ₹5,000 under the same conditions.

However, there is no late filing fee if your income is below the basic exemption limit, since its non‐taxable income. This varies by situation as certain requirements (such as foreign assets) might require you to file an ITR even if your income is small.