Income Tax

Penalties for Late Filing ITR Return

Dec 01, 2021
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An income tax assessee dreads that time of the year when he or she has to pay tax – the process might seem rather long drawn and intimidating at first. This might seem especially so with the sword of penalties lying over one’s head. But successive governments have constantly made an effort to ease the burden on the taxpayer, and the latest additions such as e-filing of income tax returns, Honouring the Honest scheme etc. have achieved this to a large extent.

The window offered by the government to pay one’s returns is a period of four months from 1 April to 31 July prior COVID. However, this has been revised and the taxpayer has been given more time to file his or her returns. But in case of a default even after this extension of time period, the assessee will be liable to pay a penalty and interest for default in furnishing the income. This also has repercussions in terms of not being able to set off losses against future gains if the returns aren’t filed on time and delayed refunds in case any are due. Other benefits of getting easy loan approvals, income address proofing, quick visa processing etc. will also be lost on not filing the ITR on time. 

What penalty do you have to pay for filing the ITR late? 

It is important to note that all persons including individuals, Hindu Undivided Family, Company, Firm etc, will be covered under the scope of Section 234F and will be liable to pay late filing fees under the Income Tax Act, 1961 and the amount that is levied as penalty will depend on the income bracket that one falls under.

But before proceeding further, some important dates to be noted are – 

Date

Event

10.01.2021

It is the last date or the extended due date for taxpayers to file ITR for FY 2019-20 for those accounts that are not to be audited. This date has already been extended twice by the Income Tax Department.

15.01.2021

It is the last date or the extended due date for taxpayers to file ITR for FY 2019-20 for those accounts that are required to be audited. 

31.03.2021

It is the last date for filing belated or revised ITR returns for FY 2019-2020.

31.07.2021

It is the last date for filing ITR for FY 2020-21 if the accounts are not to be audited.

31.10.2021

It is the last date for filing of ITR for FY 2020-21 if the accounts are to be audited (Not having international/specified domestic transactions)

With that in mind, it is clear that provisions of Section 234F will be applicable after 10th and 15th of January, 2021 for respective cases and will be calculated till the period the belated ITR is filed. With the end of the financial year on 31st March, 2021, the belated returns cannot be filed by the assessee. 

The manner in which these returns will be calculated are as follows – 

Total Income in INR (Tax Slabs)

New Regime Income Tax Percentages

The amount to be paid under Section 234F for filing between 10th Jan to 31st March in INR

Up to 2.5 lakhs

Nil

1,000

2.5 to 5 lakhs

5%

1,000

5 to 7.5 lakhs

10%

10,000

7.5 to 10 lakhs

15%

10,000

10 to 12.5 lakhs

20%

10,000

The amount that is given as INR 1,000 for penalty is a statutory relief that is provided by the income tax department as opposed to the mandate of the Act which says INR 5,000.

What are the interests that one has to pay for late filing of ITR?

The assessee is also required to pay interest on delay of filing of returns under Section 234A of the Income Tax Act, 1961, till the date of payment of taxes. The calculation of this starts immediately after the due date and is charged at the rate of 1% per month.

What happens if you make a mistake while filing the ITR?

This is no cause for panic as the Income Tax Act does provide for rectifying mistakes and omissions in the ITR. These must be rectified at any time during the assessment year or before the completion of the assessment by the department. Doing so is as good as filing a new ITR under Section 139(5) of the Act.

Other problems that occur when you file the ITR late:

Delay in funds

The assessee is entitled to refund of excess income tax filed from the government. However, if the ITR is not furnished on time, then one will be deprived of receiving these excess tax refunds at the earliest.

No carrying forward of losses

In circumstances that one has incurred any losses during the financial year under the capital gains head or any loss in the business, then not filing the ITR within the due date will deprive the assessee of carrying forward these losses to the next year and setting these off against the income in the future years. 

Conclusion 

One must not wait endlessly to file his or her ITR. It is a duty that one has to fulfil with diligence. Also, filing these returns validates one’s credit worthiness before financial institutions and makes it possible to access many financial benefits such as bank credits, etc. In case one wishes to clarify anything with the income tax department, he or she can contact their helpline number - 1800 180 1961.

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