What happens if you miss ITR filing deadline ?

ITR (Income Tax return) is filed by people who received income in any form such as salary, house property, capital gains, dividend, interest on deposits, royalty income, gainsfrom business or profession etc. Income Tax Department of India has extendedthe last date of filing ITR for the year 2020-21 to September 30, 2021 for taxpayers whose accounts are not required to be audited. Usually, the deadline for such taxpayers is July 31.

But what if you miss the ITR filing deadline?
The taxpayershave to pay a late fee under section 234F depending on the delay. Usually taxpayers have to pay ₹5000 if the ITR is filed before December 21 and ₹10, 000 if it is filed in between January 1 to March 31 of the next year. If, in any scenario, the taxpayers delay even more, then they have to face serious consequences. The minimum penalty of 50% of the assessed tax or maximum 200% penalty of the assessed tax can be levied. The dates for the year 2021 may get delayed but as of now, no further information is provided by the authorities.

Unless the assessment year is extended, taxpayers must file a return of their income generated in a financial year by July 31st of that year. Every Assessment Year (A.Y.) – which runs from April 1 to July 31 for the previous year – the government allows taxpaying residents a four-month window to consolidate their income details and file their income tax filings.

This is more than acceptable, given it just takes a few minutes to file your ITR. We must not only pay our taxes on time but also file our returns by the deadline or face penalties. The penalty for late tax return filing will be discussed in this article. But before that, here are the important dates for filing income tax return that you should know for the fiscal year 2021-22

On September 9th, the CBDT issued a circular extending the deadlines for certain direct tax compliances for the fiscal year 2021-22.

1. Extension of the ITR filing deadline:

i) The deadline for filing ITRs for taxpayers who are not subject to audit has been extended from September 30 to December 31.

ii) The deadline for reporting ITRs in tax audit cases has been extended to February 15th, 22.

iii) Filing an ITR for a transfer Pricing has been extended till February 28th, 22.

iv) The deadline for filing a Belated or Revised ITR for FY 20-21 has been extended from December 21 to March 22.

2. Audit Report on Furnishing:

i) The deadline for submitting the audit report has been extended to January 15, 22.

ii) The deadline for submitting the audit report in transfer pricing situations has been extended to January 22nd.

From the fiscal year 2017-28, if you file your returns after the due date, you will be charged a late filing fee under section 234F. For example, after the deadline for FY 2020-21, which is December 31, 2021.

The maximum fine is 10,000 rupees. A penalty of Rs 5000 will be imposed if you file your ITR after the due date (30th September) but before the 31st December.

The penalty will be doubled to Rs.10,000 for returns filed after the 31st of December of the relevant assessment year.

But Small taxpayers are given a little relief: the IT department has declared that if total income does not exceed Rs 5 lakh, the maximum penalty for late filing is Rs 1000.

If a taxpayer fails to file his return by the deadline, he can file a late return. A late return must be filed by the end of the relevant assessment year or before the assessment is completed, whichever comes first. If the assesse fails to file his return on or before the due date for the current assessment year, a belated return can be filed at any time before the 31st of January 2022.

Consequences of not filing ITR on time

Aside from the penalty imposed by the IT Department, late filing of returns can result in the following consequences:

  1. Interest accrues if you don’t file your tax return in a timely manner.

Apart from the penalty for late filing, interest at 1% per month or part thereof shall be imposed under section 234A until the taxes are paid. It’s vital to remember that you can’t submit an ITR unless you’ve paid your taxes. Interest will be calculated from the date that falls immediately after the due date.

2. Delay in refunds

If you are eligible to get a refund from the government for overpaid taxes, you must file your returns before the deadline to receive your refund as soon as possible. Refunds will not be transferred if you miss your ITR deadline.

3.  Incapable to set off loss

If the return isn’t filed by the deadline, you won’t be able to offset losses against future earnings. Losses (except than those resulting from the loss of a home) cannot be carried over to the following year. Carry-forward losses are permitted, however, if losses are incurred under residential property.

Benefits of filing the return on time

Not just the penalties, people should keep in mind the benefits of filing a tax return on time as well. You will feel responsible and good about yourself if you file your ITR on time, but the rewards do not stop there. You can benefit from filing your ITR on time in a variety of ways:

1. Ease of Obtaining a Loan

Individuals will benefit from filing the ITR when applying for a vehicle loan (2-wheeler or 4-wheeler), a home loan, and so on.

2. File a tax refund claim

If you are due a refund from the IRS, you should file your tax return as soon as possible to ensure that you receive your refund.

3. Income & Address Verification

The income tax return can be used to prove your income and address, which is required when applying for a loan or visa.

4. Visas are processed quickly.

Most embassies and consulates require you to submit copies of your tax returns for the previous two years when applying for a visa.

5. Carry Your Losses Forward

You can carry forward losses to following years if you file your income tax return before the deadline. This can be utilised as a depreciation against future earnings.

6. Preventing Penalties and Prosecution

If you don’t file your ITR, an income tax officer can start criminal proceedings against you for a period of 3 months to 2 years, as well as a fine. The period may be extended to ten years if the amount of tax you owe is higher. In the case of under-reporting of income, the income tax inspector may apply a penalty of up to 50% of the tax payable.

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