Taxpayers who are unable to file returns by the last date set by the Income Tax Department often face many questions. Financial experts and tax professionals believe that the expiry of the deadline does not mean that you can no longer file your tax return. If for some reason you have missed the August 31 deadline, you still have the option to file 'Belated ITR' i.e. delayed income tax return. However, filing returns after the due date leads to some financial losses and legal penalties.
What is belated ITR and when can it be filed?
Under Section 139(4) of the Income Tax Act, taxpayers are allowed to file belated returns. If a person is unable to file the return within the regular deadline, he can submit his return by December 31 of the relevant assessment year. This simply means that if you have missed the date of 31st August, you will have the last chance to file your tax related details on the official portal till 31st December. After December 31, filing of returns in the normal manner stops completely and after that only the option of updated return (ITR-U) remains.
Who will have to pay the penalty and how much will the penalty be?
The provision of late fee or penalty under Section 234F of the Income Tax Act is applicable for filing returns after the deadline. Under this rule, the amount of penalty is decided on the basis of the total income of the taxpayers.
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Annual income more than Rs 5 lakh: Taxpayers whose total taxable income is more than Rs 5 lakh have to pay a late fee of Rs 5,000 while filing belated returns.
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Annual income up to Rs 5 lakh: If the total income of a person is Rs 5 lakh or less, then there is a provision of relief and the limit of late fees has been limited to a maximum of Rs 1,000.
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Taxpayers with income below the basic exemption limit: No late fee or penalty is applicable on citizens whose total annual income is less than the basic exemption limit, even if they file their returns after August 31.
Additional burden of interest: Strict provisions of Section 234A
Not only late fees, but taxpayers whose tax liability remains outstanding also have to pay interest under Section 234A. If there is any outstanding tax due from you, simple interest at the rate of 1 per cent per month is charged from the date next due date till the date of filing the return. Interest is calculated considering any part of the month as the entire month. Therefore, the more the delay in filing the return, the more the financial burden of interest will increase.
Disadvantages that have to be faced if deadlines are missed
Taxpayers who file returns after the due date face penalties and lose out on many important financial benefits.
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Inability to carry forward losses: The facility to adjust (Carry Forward) any type of capital loss related to stock market, mutual fund or business with the profits of the next years ends. Only loss from house property is allowed to be carried forward in billed return.
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Long delay in getting tax refund: If your TDS has been deducted in excess and you are waiting for a refund, then due to late filing, the refund processing becomes very slow and you also have to bear the loss of interest received on the refund.
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Increased Risk of Reviews and Notices: Accounts that do not file returns on time are scrutinized more closely by automated systems, increasing the likelihood of scrutiny.
Who gets further chance: Last option of ITR-U
If a taxpayer fails to file the belated return even by December 31, then the law has given him the option to file an updated return i.e. ITR-U. Under Section 139(8A) of the Income Tax Act, ITR-U can be filed within 24 months of the end of the assessment year. However, this option proves to be quite expensive. ITR-U can be filed only when you have to pay additional tax or correct your old mistake. In this, along with the outstanding tax and interest, it is mandatory to pay additional tax ranging from 25% to 50% as penalty. No claim of loss or increased refund can be sought in this.
Take these important steps immediately to avoid inconvenience
Tax advisors are clearly of the opinion that it is not wise to delay further after missing the date. First of all, check your Form 26AS, AIS and TIS by visiting the e-filing portal. Assess all your income sources, bank interest, dividends and capital gains correctly. If any tax liability is arising, then deposit the challan immediately after adding late fees and interest on it and make sure to e-verify your billed ITR by successfully submitting it before 31st December, so that you can be safe from any departmental notice in future.