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Penalty for Late Filing of Income Tax Return


Penalty for Late Filing of Income Tax Return

The government provides taxpayers 4 months of window to combine all their income details to file their ITR every Assessment Year that is from 1 April to 31 July for the previous financial year. Actually, it takes just a few minutes to file the income tax returns and it is mandatory for all taxpayers. Apart from paying taxes without delay, it also must, To file the income tax returns before the notified due date or face issues. For returns filed after 10th January 2020, the penalty limit will be increased to Rs 10,000. However, as a relief to small taxpayers, the IT department has stated that if your total income is not more than Rs 5 lakh, the maximum penalty levied for delay will only be Rs 1000. In this article, we will discourse about the penalty for not filing the annual return.
A late filing fee of Rs. 5,000 is levied on the taxpayer if the return is filed on or before December 31 of the financial year. The late fee can range upto Rs.10,000 if the return is furnished between January to March of this year. According to the section 234F of the Income Tax Act, a late ITR attracts a late filing fees.
If the taxpayer with less gross total income that is if his income does not exceed Rs 5 lakh then the taxpayer is liable to pay is Rs 1,000 as their maximum fees. This law of levying penalty fees or late filing fees under section 234F was first declared in the Budget 2017 and came into effect from the assessment year 2018-19 or financial year 2017-18 onward. Assessment year is the year which comes next to the financial year for which the Income Tax Return is filed. The assessment year for the financial year 2019-20 is 2020-21. The main aim to introduce this law is to make all taxpayers responsible to file their income tax return on time.

Who will not have to pay a penalty for Late Filing of Income Tax Return?

Generally, the government extends the deadline to file income tax returns (ITR) for every financial year. If you fail to file your income tax return before the due date then you would have to pay a penalty or late fee that is up to Rs 10,000. However, chartered accountants are of the view that if an individual’s income is below the taxable limit or below the basic exemption limit then no worries, as that individual won’t have to pay the late fee or penalty even if he/she files his/her income tax return after the deadline.
Presently, The basic exemption limit to file income tax returns for resident individuals who are below 60 years is Rs 2.5 lakh. For senior citizens who are 60 years and above and below 80 years, the basic exemption limit is up to Rs 3 lakh. And in the case of super senior citizens whose age is 80 years and above, up to Rs 5 lakh is the basic exemption limit to file income tax returns.
To summarize the penalty or late fees details under the section 234F of Income Tax Return:

E- Filing Date

Total income Below Rs 5,00,000

Total income Above Rs 5,00,000

Up to 31st August 2019 Rs 0 Rs 0
Between 1st September 2019 to 31st December 19 Rs 1,000 Rs 5,000
Between 1st January 20 to 31st March 20 Rs 1,000 Rs 10,000

Consequences of not filing the income tax on or before the notified due date

Apart from the late fee and penalty imposed by the Income Tax Department, there are other consequences or results that a taxpayer may face for not filing an income tax return:

  • Unable to set off losses

Losses other than house property loss are not allowed to be carried forward to later years. That is, you cannot set off the losses against future gains if the income tax return is not filed on or before the due date. However, if there are losses incurred under house property, you can carry forward the losses to subsequent years.

  • Interest on the late filing

Other than the penalty for delayed income tax return filing, interest under section 234A at 1% every month or part thereof will be collected from the taxpayer till the date of tax payment. More importantly, you cannot file Income Tax Returns unless you have paid all your taxes

  •  Delayed Refunds

In case if you have to receive a refund from the government or form income tax department for extra taxes paid, then you must file the income tax returns within due date to get your refund at as soon as possible.

Benefits of filing Income Tax Return before the due date

Filing your income tax returns before the notified due date does make you feel good and creditworthy but it gives you relief and also you will get benefitted in many ways. Here are some listed below

  • Easy Loan Approval: By filing your income tax return on time you will get any type of loan approval easily, like vehicle loan approval (2-wheeler or 4-wheeler), House Loan approval etc .
  • Claim Tax Refund: In case, If you have a get any dues like a refund from the Income Tax Department, then it is good to file your Income Tax Return before the due date to get the refund easily and also as early as possible.
  • Income & Address Proof: You can use your Income Tax Return as a proof of your Income and also as your address proof which are mandatory documents needed while applying for a loan or visa.
  • Quick Visa Processing: Most consulates and embassies are required you to provide the documents of your income tax return copies for the past few years during the time of visa application.
  • Carry Forward Your Losses: If you file the income tax return before the notified due date, then you will be able to carry forward losses to the later years. And it can be used to activate against income in the following years.
  • Avoid proceedings of prosecution: If you fail to file your income tax returns regularly on time then the income tax officer can lead up with the proceedings for prosecution for a term of 3 months to 2 years and with penalty. If the tax amount for what you owe surpasses more than Rs. 25 lakh, then the period of proceedings for prosecution may go to till 7 years. The above proceedings for prosecution shall not be initiated if the net tax payable is not more than Rs. 3000.

In case, if the taxpayer fails to file the ITR before the due date due to some reason, he/she can file a belated income tax return. A belated income tax return can be filed either before the completion of the assessment year or by the end of the relevant assessment year, whichever is earlier. For the present assessment year, a belated income tax return can be filed on or before 31st March 2020,  if the taxpayer has been failed to file his income tax return within 31st August 2019.


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