Penalty for Late Filing of Income Tax Return

Vaibhav Rathi

30 Mar, 2024

An Income Tax Return (ITR) is a document that every taxpayer is required to file with the Income Tax Department. ITR is filed to declare the income earned during the previous year. It is done every year. It can be done monthly or quarterly, based on whether you have paid taxes earlier. The ITR Form, known as Form-16, is updated from time to time, and it comes with many new features to help you file your income tax return quickly and efficiently.

You have to fill in all the relevant details as per requirements and send it through a registered post or courier service so it reaches the designated address within 45 days from the due date notified by the Income Tax Department. You can also file an income tax return online. Online Income Tax return filing has various benefits, such as faster processing time as compared to physical filing at local offices or offices located abroad because all data required for processing will be transferred electronically into the computers located at the National Securities Depository Limited (NSDL)¹ where they will then be further processed.

What Happens When You Miss the Income Tax Return Deadline?

For a taxpayer in India, filing an income tax return (ITR) is crucial. If you fail to file a return on time, it can lead to penalties and interest charges. Late filing of ITR may also result in suspension or termination of employment. The consequences of filing a tax return in India are as follows:

Penalties

As per the amended rules apprised under section 234F of the Income Tax Act, filing your Income Tax Return after the deadline will make you liable to pay a maximum penalty of INR 5,000. A late fee of up to INR 5000 for people with an annual income of more than INR 5 lakhs can go up to INR 10,000 if the ITR filed is past the deadline. No penalty will be charged if your income does not exceed the taxable amount limit, even if the ITR is filed after the deadline. This is subject to exceptions. For better understanding, in FY 2020-21, if you file your ITR before 31^st December 2021, no penalty will be levied. For returns filed post-31^st December 2021, the penalty limit will be increased to INR 5,000. However, as a relief to small taxpayers, the IT department has to start that if your total income is not more than INR 5 lakh, the highest penalty levied for Delay will only be INR 1000.

Late filing Fee Details

Payment of Interest

Section 234A prescribes that a taxpayer who does not file ITR within the due date has to pay interest of 1% per month or part of a month on the unpaid tax amount. Income Tax Return filing cannot occur if the tax amount remains unpaid. Interest calculation will begin after the due date of tax filing, which is generally the 31^st of July of a particular assessment year. A longer delay in tax filing leads to more interest accumulation, thereby increasing the overall penalty for late filing of ITR.

Penalty under Section 271H

Taxpayers who cannot file TCS or TDS statements within the prescribed time frame have to pay a penalty of INR 10,000 to INR 1,00,000 in addition to the late filing penalty under section 234E. The liability under Section 234E is a fine of INR 200 per day till TCS or TDS is paid.

Reduced Time for Revising Your Return

Suppose you file your Income-tax Return and end up making a mistake. Under the new rules, you only have time till the end of the relevant Assessment Year to make the change. Under the previous rule, the taxpayers had two years to revise and remove the mistake in the ITR, which has now been brought down to one year from the end of the financial year. Therefore, the earlier you file, the longer the window is available for revising your return to rectify errors, if any.

Payment of Interest

If you fail to file an income tax return on or before the due date, you will be liable to pay interest at the rate of 1% each month or part of a month on the amount of tax remaining unpaid as per section 234A. It’s important to know that an ITR cannot be filed without paying the taxes. The calculation of the penalty will begin immediately after the due date, which is usually 31^st July of the relevant assessment year. Hence, the longer you delay in filing taxes, the more you will have to pay.

Carry Forward of Losses is Not Permitted

If you incur any losses during the year, for example, a loss under the head Capital Gains or loss in your business, ensure that you file your return within the prescribed time. Not doing so will deprive you of carrying forward these losses to the upcoming years to set off against future income.

Delay in Receiving Refunds

In case you are entitled to receive a refund from the government for excess taxes you have paid, you must file your return before the prescribed time to receive the refund at the earliest.

Conclusion

Taxpayers should file the Income Tax Return (ITR) within the due date to prevent any adverse consequences and penalties for late filing of the Income Tax Return. In case of late filing, you should clear the necessary penalties and try to file the next ITR within the due date.

FAQs

1. https://en.wikipedia.org/wiki/National_Securities_Depository_Limited