Filing of tax returns is a mandatory part of your job, even if you have paid all the taxes on time. Currently, the Income Tax Department allows 4 months to file the tax returns. That is for the financial year ending 31st March 2023, you can file the returns by 31st July 2023. If there is delay there is penalty for late filing of ITR and late fee for ITR or penalty for late filing.
In reality, tax payers get less than 4 months because the Form 16 and the Form 26AS would only get updated by the middle of May, but assessees still have around 150 days to get all the details together. With the tax department allowing you to file returns online, the entire thing can be completed in a jiffy. However, should you not file the returns on time, for any reason, there is a penalty charged. This is even if you have paid all the taxes in advance. This is now machine driven, so you have to pay the penalty before late filing of returns.
However, it is best to avoid such late fees and penalties by filing returns on time. In fact, it is suggested not to wait till July 31, but file returns as soon as all the data is in place. However, assessees need to understand the costs and penalties of delayed tax return filing and also the other consequences of the same.
Here’s what happens when a taxpayer fails to file the ITR before the end of the deadline:
Taxpayers still have the option to complete the tax filing process after the end of the initial deadline but with a late fee of Rs 5,000. All such ITRs need to be filed before December 31. In case, the taxpayer’s total income doesn’t exceed Rs 5,00,000, the penalty shall be restricted to Rs 1,000. For taxpayers whose total income is less than the basic exemption limit, there shall be no late filing fees.
Interest On Taxable Amount
The Income Tax department charges interest at the rate of 1 per cent per month on the taxable amount in case of delay in filing the return. The interest shall be applicable on the net taxable income after the deduction of TDS (tax deducted at source), TCS (tax collected at source), advance tax and other reliefs/ tax credits available under the law. In these cases, even a single-day delay is charged with interest for a month.
No Carry Forward Of Losses
Not filing the tax return by the due deadline will also lead to a loss of carry forward of losses to future years. However, losses under the header “income from house property” or unabsorbed depreciation shall be allowed to be carried forward.
Fine And Imprisonment
Apart from monetary fines, failure to file tax returns can also lead to imprisonment. Late filing of returns where the tax payable or evaded is more than Rs 25,000, may lead to imprisonment of 6 months to 7 years and a fine.
Delay Or Loss Of Refund Claims
A taxpayer can claim their refund for excess tax deducted only after filing income tax returns. Taxpayers are eligible to receive interest on such excess deductions, provided they adhere to the prescribed schedule for filing the return. Not filing ITR on time may result in a prolonged wait or loss of the receipt of the tax refund.
Benefits of filing ITR on time
While the condonation facility is offered by the Income Tax Department, it is always advisable to file the returns on time. Here is why.
• Your filed returns are a key to easy Loan Approval. Delays in filing tax returns are normally frowned upon by banks and financial institutions. Such return copies are essential for individual applying for home loans, auto loans and personal loans.
• Filing your income tax returns on time also ensures quick refund. This is more so in the case of presumptive taxes like TCS imposes on you. If you have paid excess tax to the income tax department, you should file your income tax return as early as possible.
• Income Tax returns are an important document when it comes to Visa Processing for countries including the US, UK, and Schengen. Most embassies and consulates require you to furnish copies of your tax returns for the last couple of years for visa application.
• Probably, one of the most important reasons for you to file returns on time is to ensure that you get the benefit of set off and carry forwards of losses. Only if you file the income tax return within the due date, you will be eligible to carry forward losses to subsequent years. You can use such losses to set off against your future income. This facility is not available in the case of delayed returns.
• Finally, it is a good idea to stay in the good books of the tax man. By filing returns on time, you can avoid Penalty and Prosecution. This can help you maintain a clear tax track record with respect to your tax papers.
FREQUENTLY ASKED QUESTIONS (FAQ)
What is the deadline for filing ITR?
The deadline for filing tax returns (unless extended by CBDT) is 31st July.
What happens if I file my ITR after the deadline?
If the return is not filed by the deadline, then penalty is charged for late filing which is allowed up to 31st December of that year.
How is the penalty for late filing of ITR calculated?
The penalty can be up to a maximum of Rs5,000 but is limited to Rs1,000 if total income is less than Rs5 lakhs.
Can the penalty for late filing of ITR be waived?
It can be waived under special circumstances subject to discretion of the ITR department.