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Penalties for Not Filing Income Tax Returns within the Due Date

28 January 2022
3 minutes

The last date for filing income tax returns for individual taxpayers is usually July 31 of the assessment year that follows a particular financial year.

To quickly brief here, for the financial year 2021-22, you will be filing taxes in the assessment year 2022. 

Taxpayers who fail to file their IT returns within the stipulated date can face a late ITR filing penalty. Moreover, they might have to face various consequences. These repercussions are discussed below.

There are times when the last date for filing taxes may be extended by CBDT.

Late ITR Filing Penalty and Consequences 

There is a certain penalty for late filing of income tax return. Individuals filing income tax returns beyond the due date have to pay these penalties:

Penalty under Section 234F

As per recent amendments in Section 234F of the IT Act, taxpayers who file ITR after the deadline have to pay a maximum fine of Rs. 5,000. The Income Tax Department of India has lowered the maximum penalty for late tax filing from Rs. 10,000 to Rs. 5,000 from FY 2021 onwards. 

Therefore, if one files the IT return before the extended due date of December 31, 2021 (February 15, 2022, for audit cases), then they are not liable to pay the late ITR filing penalty. However, individuals filing returns after the deadline will have to pay Rs. 5,000 as a penalty. 

In case the total income of an individual does not exceed Rs. 5 lakh, then the maximum fine for late ITR filing would be Rs. 1,000. 

Payment of interest

As per Section 234A, taxpayers who do not file ITR within the due dates have to pay an interest of 1% per month or a part of a month on the tax amount that is unpaid. ITR filing cannot take place if the tax amount remains unpaid. 

Calculation of interest will begin from the date after the tax filing due date, which is generally July 31 of a particular assessment year. A longer delay in tax filing would lead to more interest accumulation thus increasing the overall penalty for late filing of ITR.

Penalty under Section 271H

Those unable to file TCS or TDS statements within the due date have to pay a penalty of Rs. 10,000 to Rs. 1,00,000 in addition to the late ITR filing penalty under Section 234E. The penalty under Section 234E is a fine of Rs. 200 per day till TCS or TDS is paid. 

In addition to penalties, late ITR filing comes with these consequences:

Less time for revising returns

According to the latest modifications in IT Act, individuals making errors while filing ITR have a one-year window to correct and revise mistakes. Before this modification, taxpayers were given a 2-year period to make necessary corrections. 

Now, one will have the chance to make changes only till the end of a relevant assessment year. So, the earlier an individual files income tax returns, the longer will be their window for making relevant corrections and revisions.

No chance to carry forward losses

In case taxpayers face losses in their business or under the ‘Capital Gains’ head, they should make ITR filings either on or before the deadline. This will allow them to carry forward such losses in the following year, thereby setting off losses against income in the future. 

Delay in getting refunds

If an individual is entitled to get refunds for excess tax payment, it is necessary to file ITR before the due date to receive the refund faster.

Advantages of Filing Income Tax Return on Time

Filing your tax before the due IT return filing date is not only advisable but can offer numerous benefits too. Some prominent advantages are-

Faster Processing of Visa

For Visa processing, most embassies demand copies of your income tax returns for the past years. Thus, filing your IT returns before the due date can help your Visa application process faster.

Easy Loan Approval

If you file the ITR within the stipulated time, it will become easier for you to get approval for a house or vehicle loan.

Proof for Income & Address

You can use an income tax return as your income and address proof while applying for your visa or a loan.

Final Word on ITR Filing Penalty

Taxpayers should make sure to file their ITRs within the due date to avoid adverse consequences and penalties on late filing of Income Tax Returns. In case of late filing, they should clear the necessary penalties and try to file the next ITR within the due date.

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