I live and work in New Jersey. But my company is incorporated in Delaware and hence they withhold DE state tax and that is the only state tax withheld on my W2. I know I have to file DE non resident return but do I have to file a NJ return if there I have no NJ income? Please reply.

NeedAdvice:

Whoever handles your company's payroll obviously needs some training in employer tax regulations. Where the company is incorporated is irrelevent to which state tax should be withheld. If you work and live in NJ, the NJ taxes should have been withheld from your pay.

Yes, you must file a NJ tax return and it is likely you will have to pay NJ state income taxes. See if you can get a letter from your company's payroll office stating that they mistakenly withheld taxes for the wrong state in your case. Attach the letter to your NJ state income tax return and request that NJ waive any penalties and interest or else NJ will hit you with a under-withholding penalty.

In the meantime, file the Delaware return. Delaware should refund all of the withheld taxes, which you will probably need to pay the NJ tax bill.