Every year, individual taxpayers are required to file their income tax returns by July 31st. This date is known as the due date of filing of income tax return. The government of India may also extend this due date as they deem fit. For the FY 2016-17, the deadline to file the income tax return was 31st July 2017 but it got extended to 5th of August 2017.
If you fail to file your income tax return on or before the due date, you can still file the ITR until 31st March 2018 (end of relevant AY 2017-18). Before FY 2016-17, the income tax return could be filed up to one year from the end of relevant assessment year. As per the Budget 2016, the time period to e-file Income Tax Return has changed to the end of the relevant assessment year. Which means, earlier we had two years from the end of Financial Year to file our income tax returns, but now this time is being reduced to one year.
Returns File after the Due Date of Filing Income Tax
The return filed after the due date is known as Belated Return under section 139(5) of the Income Tax Act. The government has not levied any monetary penalties for late filing of income tax return till now. A mandatory penalty of Rs. 5,000 is imposed if the return is filed after 31st July but before 31st December. A penalty of Rs. 10,000 in any other case has been proposed which will be applicable from next Financial Year. Where the income of the assessee does not exceed Rs. 5 Lakhs, it is proposed that fine should not be more than Rs. 1,000. Hence, for the FY 2016-17, we can still file the belated return without worrying about any hefty penal consequences.
Although there have not been any mandatory penalty proceedings, a delay in filing of return can potentially lead to a loss of a lot of money.
Let’s talk about few of such implications.
If you have made cash deposits in your bank accounts during the demonetization period i.e. from 09th November 2016 to 30th December 2016 more than Rs. 2 Lakhs and have not filed your return, then you will face the following consequences;
- Be prepared to receive an income tax notice from the IT Department asking you reasons for the non-filing of return as reporting of such transactions has been made mandatory by the tax department for the FY 2016-17/AY 2017-18.
Banks must report such high-value cash transactions to the tax department and submit the PAN of the taxpayer. Taxpayers will be asked to explain the details of cash deposits made by them.
- The tax department may also send you a notice seeking information, documents, statements, accounts etc. as they feel relevant. If the assessee fails to provide such relevant information, then he/she may be required to pay the penalty of Rs. 10,000 for each failure.
Interests on Refunds
The Income tax department pays an interest on the refunds claimed by the taxpayer on their return. The interest is calculated from the beginning of the assessment year, i.e. from 1st April of the assessment year till the refund is processed. But, in case the income tax return is filed after the due date, then the interest on such refund is calculated from the date of filing such belated return till the refund is granted. That means, even if you file your return of income one day after the due date, then the interest on the claim will be calculated from the day you file your returns. Filing the return after the due date even if it’s just a matter of one day will lead to loss in interest amount.
Revision of Income Tax Return
If a person has filed his income tax return on or before the due date and then realizes that there are some error or omissions in the return application, he/she can modify the return by correcting the mistakes and filing the updated return. This concept of modification and correction in the original return is known as a revision of the income tax return. Such provision of revising of the errors in return is not available if we file the return after the due date. Hence, if we are filing a belated return, then it becomes very much important for us to check the return for any errors and omissions.
Carrying Forward Loss
There is a provision in income tax that allows set off and carry forward of losses. In other words, losses which were not set off completely in the relevant previous year and were brought forward to the next years can only be allowed to be carried forward and set off if the return of income is filed on or before the due date of filing of the return. The only exception to this is the loss from House Property which means any loss from House Property can be carried forward and set off in the case of the belated filing of the return.
Under Section 234A, on late filing of return after the due date, penal interest at 1% per month or part of a month is also charged on the amount of tax unpaid along with the tax liability. The interest is calculated from the due date of filing of the return to the actual date of filing of the return. The tax department can initiate prosecution and assessment if the return is not filed even at the end of the relevant assessment year and if the amount of unpaid tax exceeds, Rs. 3,000. Further, in case no tax is payable on the return filed then the taxpayer won’t be liable to pay interest even if the return is filed after the due date (but before the end of the relevant assessment year).
Linking PAN with Aadhaar before Filing for Returns
The government has lately made it compulsory to link all the bank accounts with Aadhaar and PAN as well as updating the same in the Income Tax Portal. If in the past, you have e-verified your return with Aadhaar OTP or have linked your Aadhaar with your PAN, it is advisable to file your income tax return within the prescribed due date to avoid any inquiry, notices from the government. Further, in case, a person is unable to file the income tax return on or before the due date, the least one can do is to pay the taxes within the due date. If all the taxes are being paid or TDS is deducted, the penal interest under section 234A, 234B and 234C will not be levied. In conclusion, it is always in the best interest of the assesse to file a belated return of income rather than to not file a return at all.