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written by Khatabook | October 27, 2021

Penalty for Late Filing of Income Tax Return

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Public infrastructure such as roads, bridges, hospitals, and water pipes are constructed with the help of tax funds. Since tax funds act as a social bridge between residents and government, they hold the latter accountable for citizens' basic needs. Thus, people should comply with taxation rules as it is for their benefit. 

You must pay your taxes on time to avoid paying penalties or imprisonment. Tax payment on time is a legal requirement for all eligible citizens of India. The income tax department has provisions for penalties or imprisonment if taxpayers fail to pay their taxes on time.

Significance of Income Tax Returns (ITR) Filing

During the Assessment Year (AY), taxpayers have a four-month opportunity to consolidate their previous year's (PY) income and file their income tax returns. Even though the PY and the AY begin on 1st April and end on 31st March of the following year, the assessment year begins after the preceding year ends. A previous year's income is assessed and taxed in the Assessment Year, which is the current year.

Taxpayers who are not subject to a tax audit must file their ITR by the 31st of July of the assessment year. To avoid income tax late filing penalty, taxpayers must file their ITR by the deadline each year. It is punishable if you fail to file your return before the deadline. The ITR reporting deadline for FY 2020-21 was extended to December 31st, 2021, due to the pandemic.

Penalties for Late Filing U/S 234F of the income tax act

Section 234f of income tax act imposes a late filing charge if you fail to file your ITR by the deadline. This rule has been in place since the year 2017-18. After the due date, you can be fined up to Rs 10,000. However, if the ITR is filed before 31st December, a fine of Rs 5,000 would be charged. In addition, if the taxpayer's total income does not exceed Rs.5 lakhs, a maximum penalty of Rs.1000 would be levied for the late submission. 

Following is the penalty for late filing of income tax return:

Particulars

Penalty

ITR filed after the due date but before 31st December

Rs 5000

ITR filed after the due date but before 31st Mar (after 31st Dec)

Rs 10000

The above-mentioned income tax late fee must be paid before the tax return is filed. The ITR will not be approved if the penalty is not paid before filing.

Taxpayers who fail to file their returns on time may also be subject to a penalty under Section 276CC, which entails the following: 

  1. Unpaid taxes amount less than Rs 25 lakhs are punishable by jail for 3 months to 2 years by the income tax officer. 
  2. Where the unpaid tax amount is more than Rs 25 lakhs, the defaulter can be imprisoned for 6 months to 7 years.

This type of punishment, however, is reserved for uncommon situations. An additional 1% interest is levied in the majority of situations for late income tax payments.

Also Read: Home Loan Tax Benefit - Know your Income Tax benefits of Owning a House

What If You Fail to File Your Return within Due Dates?

As per the amendment made in Finance Bill 2016 under the Income-tax Act, 1961, taxpayers who miss the deadline for filing their tax returns can file late IT returns within 1 year of the end of their respective assessment year or before the conclusion of their assessment, depending on which is earlier.

For example, for the AY 2020-21, a taxpayer can file a belated tax return on or before March 31st, 2022. A belated return can be filed any time on or before March 31st, 2022, if the taxpayer fails to file their return on or before the announced due date of AY 2021-22.               

Penalties and Punishment

Taxpayers who don't file their ITR by the extended deadline can be fined and prosecuted for a period of 3 months to 2 years by the income tax office. Tax debts of more than  Rs 25 lakhs can result in a 7-year prosecution period. The procedures would be put on hold to avoid this unless the total amount of net payable tax surpasses Rs 3000. The income tax office can impose a penalty amounting to 50% of the u npaid tax in case of underreported income.

Consequences of Missing/Late ITR Filing 

Apart from the penalty for late filing of income tax return, there are various other disadvantages of late filing of income tax return, which are detailed below:

1. Loss of interest on refund: If a taxpayer is due for a refund, interest on that refund will not be paid for the period of delay in filing the income tax refund.

2. Revision of unethical returns is not possible: If an income tax return is filed after the due date, the taxpayer cannot update it in the event of an error.

3. Certain Section 80 deductions are not available if the income tax return is filed late.

If the income tax return is not filed by the due date, the taxpayer will be unable to carry forward losses arising from various heads, except losses deriving from House Property and unabsorbed depreciation.

No Carry Forward of Losses

If you had any losses throughout the year, such as a loss under the Capital Gains heading or a loss in your business, make sure you file your return before the due date. If you do not do so, you will lose the ability to carry these losses forward to future years to offset income.

Interest on Late Filing

Payments of income tax are due in instalments within a year of the income being generated. The estimated income of the taxpayer would be taxed according to the income tax slab rates, and tax would be due on such anticipated income. This year's balance tax would be due at year's end if there were discrepancies between expected and actual revenue.

Known as Advance Tax, this is the method of paying taxes in instalments throughout the same year that the income is generated. The interest of 1% per month is charged if the Advance Tax is not paid according to the schedule established by the government.

Please note that a tax return cannot be filed until the taxpayer has paid their whole tax amount. The taxpayer can file a tax return only after they have paid the total amount of income tax.

According to section 234A, in addition to the income tax late filing penalty, interest is charged at a rate of 1% per month until the date of tax payment. The interest begins to accrue immediately after the due date and continues until the whole amount is paid. Aside from that, the taxpayer will not be authorised to submit an ITR until all taxes are paid. As a result, the longer you wait to pay, the more interest you'll be charged.

Delayed Refunds

If you've paid excess income tax to the Government, you are entitled to a refund. In case you filed your taxes by the deadline, the refund will be delayed. The Income Tax Department also has the right to deny your refund request.

Also Read: Section 54 of Income Tax Act – Capital Gains Exemption

Conclusion

Filing ITR for income beyond a certain threshold is essential for every taxpayer as it is a government mandate. Also, to avail of some financial services and products, you must show past ITR returns. Filing ITR on time helps in eliminating any kind of income tax late filing penalty for the taxpayer. We hope through this article you have understood the necessity of filing the ITR before the prescribed due date. You can download the Khatabook app for more information regarding income tax and GST compliance and policies.

FAQs

Q: Is it necessary to e-verify an individual tax return (ITR)?

Ans:

ITR e-verification is required. ITR must be e-verified within 120 days of their filing date to be valid. In addition, one Electronic Verification Code (EVC) can only be used to authenticate one return at a time. 

Q: Is it possible to file an ITR for the last 3 years now?

Ans:

No, you can't file an ITR for the last three years in one year. To file your ITR beyond the extended deadline, you can use a "Belated Return" introduced in the Finance Bill of 2017 under the Income-tax Act 1961, to file your ITR with a penalty.

Q: Can the ITR be filed after the due date?

Ans:

Yes. A late ITR can be filed after the deadline. However, it has to be filed before the end of a given assessment year.

Q: Is there any penalty if the ITR isn't filed on time?

Ans:

If you fail to file your ITR by the due date, you will be charged a late filing fee under section 234F of the income tax act. As of 2017-2018, this rule is in effect. If you fail to file your ITR by the due date, you can be fined up to Rs. 10,000.

Q: What is the due date for Filing ITR in AY 2021-22?

Ans:

The government has extended the deadline for filing the income tax return (ITR) for FY 2020-21 by three months, from 30th September to December 31st, 2021. As a result of technical difficulties with the new income tax platform, many taxpayers cannot complete their ITR filing. Therefore this measure was taken by the government.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.