Consequences of non-filing of ITR on the due date

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Consequences of non-filing of ITR on the due date 

Generally, 31st July is the due date to file tax returns of certain taxpayers. Considering the COVID-19 pandemic the due date has been extended to 31st December 2020 to file the income tax return (ITR) for FY 2019-20 (AY 2020-21). If you miss filing the tax return by the due date, you can certainly file a delayed return. However, filing of an income tax return by the due date is necessary to avoid penalties and other consequences and inconveniences. Let us understand these consequences in detail:

Click here to know what is the due date to file your tax return.

What are the consequences of non-filing of a tax return by the due date?
Penalty/Fees u/s 234F:

In the Union Budget 2017, a new section 234F has been inserted in the Income Tax Act,1961 for levying a penalty if the return is not filed within the prescribed due date.  The penalty referred to in section 234F was made effective from AY 2018-19.

If a person fails to file the income tax return by the due dates mentioned in section 139 (1), shall be liable to pay the penalty of

  • Rs 1,000 if the total income is less than Rs 5,00,000/-
  • Rs 5,000 if the total income is more than Rs 5,00,000/- and return is furnished up to 31st December of relevant AY
  • Rs 10,000 if the total income is more than Rs 5,00,000/- and return is furnished between 31st December to 31st March of relevant AY.

(Read in detail about Section 234F here)

Interest u/s 234A:

In case the return is not filed by the due date, along with the penalty as discussed above, a person is also required to pay interest under section 234A on the tax dues. As per section 234A, a person is required to pay interest at the rate of 1% per month, or part of a month, on the unpaid tax amount. The interest will be calculated immediately from the due date; hence it is advisable to file the delayed ITR at the earliest possible.

(Read in detail about Section 234A here)

Restrictions on carry-forward of losses:

There are restrictions on carrying forward of the losses incurred by a taxpayer as per the Income Tax Act. One of the restrictions is that the taxpayer cannot carry forward the losses incurred during the year to set-off against future income if he does not file the Income Tax return by the due date. For Eg, If you incur a Capital Loss or Business Loss during the year, then you should ensure to file your tax return by the due date. That will help you to get an opportunity to lower your tax liability in the future.

Prosecution

Non-filing your income tax returns can sometimes lead to prosecution if the IT department has a reasonable reason to believe that the taxpayer has willfully failed to furnish the returns on time. In a judgment, the Delhi High Court held the prosecution proceedings even when the taxpayer was entitled to a refund. It is to be noted that the Income Tax Department can proceed with prosecution only when the taxpayer doesn’t file returns or pay attention to the notices sent by the IT Department to the taxpayer or has significantly large tax-dues. IT Department can initiate the proceedings for prosecution for a term of 3 months to 2 years, with a fine, if an individual fails to file the Income Tax Return altogether.

Other inconveniences

Other than the above-mentioned consequences, a taxpayer can face some inconveniences in case of delay in filing a tax return; like –

Loss of Interest and delay in the release of refund: A taxpayer is always advised to file his tax return before the due date. In case a taxpayer claims the refund of tax in his ITR, he will receive the refund late. As a result, the interest receivable from the IT department on the amount of refund will also be reduced.

Reduced time to file a “revised” return in case required: A taxpayer can revise his belated tax return. However, one must note that a taxpayer can file a revised return only until the end of the relevant Assessment Year.

Q. Am I liable to pay the penalty for filing the delayed return, if my total income is below the taxable limit?

Ans: Section 234F of the Income Tax Act, 1961 mentions that the penalty is applicable when a person fails to file his Income Tax return as required under section 139(1). As per Section 139 (1), every company or a firm; or a person other than a company or a firm, –

if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income ” In other words, if you are not mandatorily required to file tax return, the question of payment of penalty does not arise.

(Click here to know who are mandatorily required to file income tax returns)

So, if you are an individual or HUF and your Gross Total Income ( i.e. Total Income before applying deductions under Chapter VI – A) is more than the basic exemption limit of Rs. 2,50,000/- (Rs 3 lakhs for Senior citizens and Rs. 5 lakhs for super senior citizens), then you are liable to pay a penalty for delay in filing the tax return, irrespective of whether you have any tax liability or refund.
For Eg. If an individual’s Gross Total Income is Rs 3 lacs. However, after applying deductions u/s 80C his Income chargeable to tax is Rs 2 lacs. He is not required to pay tax. However, he is liable to file a tax return and hence will attract a penalty of Rs 1,000 u/s 234F for delayed filings.

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About CA Janhavi Phadnis 78 Articles
Chartered Accountant and financial consultant. She has worked with corporates for 14 years with expertise in Forex-Treasury, Accounting, and Corporate Tax. She can be contacted at info.financepost@gmail.com

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