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5 Lessons to Learn with Late Tax Filing

The Income tax rules require a person to file income tax returns whether tax is due or not. Simply paying the amount due of tax is not enough, every person above the exempted income limit, must file the tax return.

For Individual Income tax return needs to be furnished on or before 31st July of the Assessment Year. Taxpayers are supposed to file their tax returns by this due date, but in case you have missed the deadline you can e-file the tax returns by following year’s 31st March (budget 2017 revised this to 31st December of the same year effective from A.Y. 2018-19). You might lose out on some advantages if you have missed filing your tax returns before the deadline. There are some important lessons to learn about late tax filing which will give help you understand why delay in filing tax returns should be avoided at all cost.

1. Save Yourself from Paying Penal Interest

In case there is a delay in filing your tax returns, and you have some taxes unpaid, you have to pay a penal interest u/s 234A at 1 percent per month up to the date of filing the returns. This interest will, however, be charged only if there is any tax payable by you. But if the balance tax has been fully deposited by you before 31st March of that financial year, then payment of interest u/s 234A will not be applicable even if the return is filed after the due date.

2. Keep the Scope for Rectifying your Errors

If you file your income tax return after the due date and discover an error in it, you will not be able to file a revised return. It simply means that if you have filed a belated tax return and discovered some glitches in the same or you have forgotten to declare some income and wish to rectify it through filing a corrected return, you cannot do so. But with the amendment made by budget 2016, starting A.Y. 2017-18 you will now even be able to revise a return filed after the due date (i.e. belated return).

This means that if you lose the opportunity to revise the return and the assessing officer discovers any mistake he may penalise you. But if you wish to avoid any penalty due to inability to revise the return, it is in your own interest to calculate and pay the due taxes on account of mistake or omission. You can do this voluntarily without waiting for a notice from the department and inform it your jurisdictional assessing officer by writing a letter.

3. Avoid Losing Interest on Refunds

As per the income tax act if you have paid excess taxes to the government then you are entitled to receive interest @ 0.5% pm on the excess amount. Interest in such a case shall be allowed for a period commencing from the 1st day of April of the assessment year to the date on which the refund is granted. But no interest is payable for the period attributable to the delay in filing the tax return beyond the due date, by the taxpayer. This means that you will not get any interest for the period starting 1st April of the assessment year till you file the return if it is filed after the due date.

Try and file your returns before the due date to avoid suffering from the loss of interest on refunds.

4. Late Filing may Lead to Denial of Carry Forward of Losses

You can carry forward your losses under various heads of income that you have incurred in the financial years to next 8 assessment year. But the carry forward of losses and it’s set-off against future gains is allowed subject to few conditions. This set-off can result in substantial future tax saving for you. However, if you wish to forge your entitlement to offset these losses against future taxable gain, you must file your tax returns and claim the related loss before the due date (i.e. 31st July, 30th September, as applicable to you).

5. File Tax Returns in Time to Avoid Penalties and Prosecution

Generally, you are liable to pay only interest on the amount of taxes due if you fail to furnish the tax return with the time allowed under the Act. But if you don’t furnish the tax return before the end of the assessment year (revised to 31st December of the assessment year starting A.Y. 2018-19) the tax officer may impose a discretionary penalty of up to Rs. 5,000 u/s 271F of the Act.

Further, the tax authorities can also initiate a probe into the reasons for non-filing of the tax return by you.

And in few extreme and rare cases where it is found that you wilfully avoided filing the tax return within the time allowed it may impose an imprisonment u/s. 276CC as under

  1. In case if the tax sought to be avoided was less than 25 Lakh – Imprisonment for a term 3 months to 2 years.
  2. In case if the tax sought to be avoided was more than 25 Lakh – Imprisonment for a term 6 months to 7 years.

[ Read: Tax Evasion Penalties and Prosecutions ]

However, the taxpayer will not be prosecuted for failure to file the return if the additional taxes payable (after adjusting TDS and advance tax) by him does not exceed Rs. 3000.

Apart from all the technical points mentioned above, filing your tax returns on time becomes important if you wish to apply for visas, bank loans, etc. Moreover, late tax filing can further delay processing of your tax refunds. Therefore, make a promise to yourself that now onward you will file your tax returns on time to avoid any penalties and hassles relating to taxation.


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Sony Pandey
Sony Pandey
Sony works as a Tax Researcher at H&R Block India. She makes taxes easy to understand for people. She creates content for the website, marketing activities and social media. She carries experience in creating a wide variety of content like blogs, guides, press releases, research papers, etc.

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