ITR or Income Tax Returns are basically, reasons backed with documents and data to prove to the income tax department the reasons for not paying your taxes or paying less tax. Such returns can only be filed via the E-filing method that too after the tax has been paid. This means, if you have not paid taxes, then you cannot file ITR.
The government has recently introduced some major changes to the existing income tax structure, which got implemented from the start of the new fiscal year, April 1, 2018. One of which includes – a mandatory penalty for the late efiling income tax return (ITR).
To give you room to prepare, Government of India offers a duration of 4 months, i.e. 1st April to 31st July to plan your investments and file your taxes. If you don’t file the ITR in the stipulated window, even though you get a grace period of about a year ( from the end of the relevant financial year ) to file the ITR, you will be charged with penalties apart from losing on several other benefits.
This article will help you get more details on the consequences and penalty that you face if you don’t file your ITR on time.
Penalty on late filing of ITR
As per the new income tax law, starting from 1st of April, if you cross the deadline of filing the ITR on or before July 31, 2018 (unless the tax department extends it), you will be liable to pay a penalty of ₹. 5000 – ₹. 10,000. The penalty amount will depend on the delay time. To be more precise, the penalty will be as follows:
A) If you file the ITR on or before the 31st July, then the penalty charged would be ₹. 0/-
B) If you file the ITR on or before the 31st December, then the penalty charged would be ₹. 5,000/-
C) If you file the ITR on or before the 31st March, then the penalty charged would be ₹. 10,000/-
D) As per section 234A, 1% for every month, or part of a month, on the pending unpaid tax amount ( this will be an interest charged )
E) If you’re a small taxpayer with an income of less than ₹. 5 lacs, then the maximum penalty levied will not be more than ₹. 1,000.
However, people below the age of 60 years will not be liable to pay a penalty, if your gross income is below ₹. 2,50,000 and you file a belated return.
Consequences of not Filing before the Due Date
Aside from the penalty that you will incur, you will also lose out on several benefits if you don’t file your ITR on time. Some of these include:
You will not be able to set off losses
This means adjusting your losses against your profit or income. Basically, if you don’t file your ITR before the due date, then you will not be able to carry your present year’s losses (other than house property loss) forward to coming years to be adjusted against the probable gains that you will make in the future.
You will also be charged with an Interest on delaying the ITR filing
This means that aside from the penalty that you will incur for late filing of ITR, there will also be an interest applicable under section 234A. This will be fixed at 1% per month or part of the month, till the tax payment date, starting soon after the due date.
The Refunds that you’re expecting will also get delayed
In case you are expecting refunds from the government, then you must file the ITR on time i.e. before 31st July, to expect the refund soon. A delay from your end to pay will cause a delay in receiving the refunds too. Furthermore, you will also lose out on any interest that is due to the refund too.
You will not be able to revise the returns filed
This means, if you file the ITR after the due date, then you will not be able to revise the return in case there is any error.
You will not be able to claim deductions
The income tax department provides us with several ways to reduce the tax burden, and it is up to us to choose the one we see fitting best into our existing situations. Several of the deductions mentioned under Section 80C (depending on the nature of your income) won’t be applicable in this scenario too. This means not only will you be paying extra penalty and interest charges, but will not be able to claim the deductions that you might be eligible for.
Process to File belated Income Tax Returns
In case you have missed efiling income tax return, we strongly recommend that you file a belated return as soon as possible. You have time to file the return before the completion of the assessment year (ay) i.e. by 31st March 2019. To complete efiling income tax return, you need to visit the Income Tax official Website and follow the process.
Do keep the following documents handy, as you may need them when filing the taxes.
- PAN Card
- Aadhaar Card
- Form 16 or 16A
- Bank Statement
- Interest Statement for FDs
- Home Loan statement (if applicable)
- Rent receipt (if applicable)
- TDS certificate
- Form 26AS to cross-check TDS details
- Proof of investment (if applicable)
- Premium receipt for Life Insurance (if applicable)
- Proof of donations (if applicable)
- Medical insurance premium receipt (if applicable)
- Details of income that is exempt
If you miss efiling income tax return in the approved duration (relevant assessment year, or the one after that), then you will have to wait till the income tax department sends you a notice to file the same.