When to use NOFOLLOW on internal or external links

You do not gain any advantage by using the nofollow attribute for internal links but it can help Google evaluate a website. For external links there are more important guidelines.

Along with the UGC and sponsored tags, nofollow is an indicator to Google, and may be used to influence the way that links are evaluated. if, for example, your link is a paid advertisement, make efforts to tell Google about it. A nofollow rel attribute is one way to do this.

The Google webmaster guidelines explicitly mention the nofollow and sponsored attributes.

Make a reasonable effort to ensure that advertisement links on your pages do not affect search engine rankings. For example, use robots.txt, rel="nofollow", or rel="sponsored" to prevent advertisement links from being followed by a crawler.

Google Content Guidelines
The three types of rel attribute for links

If your website is getting (many) backlinks with the nofollow attribute, it will not have a negative impact on your site. Nofollow links are not seen as a negative signal.

Regular links don’t need a rel attribute

if you’re create standard links, just to help the user, there’s no need to use the rel attribute at all. The standard link code is good enough. For example:

<a href="https://www.sistrix.com/ask-sistrix/offpage-optimisation/what-is-link-building/are-nofollow-links-harmful/">Are nofollow links harmful?</a>

Video explanation by Matt Cutts / Google on the subject

Further information on the subject:

27.04.2021