Income Tax Taxation

Read about the Penalty for Late Filing of ITR


Income Tax Return (ITR) is a statement that is filed every year by a taxpayer disclosing information about his/her income and applicable tax liability. ITR is furnished by the taxpayer to the Income Tax Department[1] in the prescribed form. Different forms for returns are filed for different taxpayers, depending upon their income and source of income. Read an analysis of the ITR Act as well as Penalty for Late Filing of ITR.

Income Tax Return has to be filed within 31st July of every financial year. Although for the FY 18-19, the last date of filing ITR was extended to 31st August 2019. Income tax authorities penalized the taxpayers who don’t file the income tax return within the due date. 

According to section 234F that came into effect from 1st April 2017, taxpayers who failed to file an income tax return within due date are liable to pay the penalty up to INR 10000 depending upon the actual date of filing of return, which is explained in brief henceforth.

Filing of Income Tax Return u/s 139(1)

Income tax return filing is mandatory for the following taxpayers:

  • Limited Liability partnership
  • Domestic, private or public companies
  • Individuals whose limit of exemption as per the income tax slab exceeds.

Filing of Late Return u/s 139(4)

Assessee can file the belated return within a period of one assessment year or before the completion of such year, in case he has not filed the return within the due date. Filing the ITR after the deadline can make the taxpayer liable for penalty under section 234F. The maximum penalty under this section is up to INR 10000, depending upon the total taxable income of the assessee.

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Date of filing the return (FY 18-19)   Income below INR 500000 Income exceeding INR 500000
Up to 31 August   NIL NIL
1st September – 31st December     INR 1000   INR 5000
1st January – 31st March     INR 1000   INR 10000

Payment of Interest

In case the taxpayer doesn’t file the Income Tax Return on or before the due date, he will be liable to pay the interest along with a penalty. As per section 234A, he is liable to pay interest at the rate of 1% for every month until the amount remaining unpaid.

Calculation of penalty & interest starts immediately from the expiry of the due date, i.e., 31st July. (31st August for the FY 18-19).

Income Tax Return in case of Loss

Section 139(3) of the Income Tax Act states that filing of income tax return is not compulsory in case assessee incurred loss during the previous year. Certain provisions of this section are as follows:

  • Filing of income tax within the due date is mandatory if the assessee incurred the loss under the head “Capital Gain” and “Profits and Gains from Business & Profession” and be willing to carry forward the same and offset it with future income.
  • The assessee is allowed to carry forward his loss incurred under the head “House Property” even if he has not filed the return within the due date.
  • Losses arising out of any other source of income during the same year are allowed to be set off even if the return is not filed within the due date.
  • Loss of the current year cannot be carried forward for the next year until the return of such loss is filed within the due date. However, loss of the previous year can be carried forward if the return of the loss in that year was submitted by the due date.
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Revised Return

The taxpayer, if after the filing of the return, realizes that the return filed by him under section 139(1) has been erroneously filed, can file the revised return within one year following the expiration of relevant assessment year. There is no restriction in filing the revised return. Any number of amended returns can be filed during the year.

Revised return is governed under section 139(5) of the Income Tax Act. Revised return can be filed in the same original Income Tax form or any different form. The late return doesn’t fall under the purview of this section, and thus they cannot be revised. Once the amended return is filed under section 139(5), the revised return becomes valid, nullifying all the previously filed returns.

Defective Return

As per section 139(9) of the Income Tax Act, the income tax return is considered as defective in certain situations. If the taxpayer leaves the mandatory fields empty or if the assessee doesn’t submit the necessary proof to claim the tax paid in the form of TDS.

Income Tax Officer intimates the taxpayer about the defectiveness in return and issues the notice allowing the taxpayer to rectify the defect within 15 days of such notice. If the assessee fails to rectify the same within the prescribed time limit, the return filed ceases to be valid.

Benefits of Timely Filing of Return

Following are the advantages of filing ITR on time within the due date:

  • Loan Approval: filing of ITR on time helps the assessee to avail the loan and finance. Banks for approving any form of loan application such as car loans, two-vehicle loans, and house loans, etc. demand a copy of the filed return for a minimum of 3 years.
  • Claim Income Tax Refund: Assessee needs to file the return within the due date to claim the refund, if any, due to Income Tax Department.
  • ID proof: Income Tax Return can be used for the Identity and Address proof. They are a mandatory form of address proof in case of VISA or loan application.
  • Visa processing: Most of the embassies demand the assessee to furnish the copy of income tax return for the past couple of years.
  • Carry forward of Losses:  the assessee is allowed to carry forward the losses incurred during the relevant year for set off against the profit incurred in future years.
  • Avoid penalty and prosecution: income tax authority can initiate the prosecution for a minimum term of 3 months that can be extended to 2 years. In case the tax liability exceeds 25 Lakhs, such imprisonment term can be increased up to 7 years.
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Consequences of Late Filing of Return

Apart from the penalty levied by the income tax department, there are following consequences of non-filing of return within the due date:

  • Set off not allowed:  loss incurred other than the loss from house property is not allowed to be carried forward to subsequent years.
  • Interest: Interest is charged as per section 234A at the rate of 1% per month till the date of payment of taxes. Thus, ITR cannot be filed until the taxes are not paid.
  • Delay refunds: In case the excess tax is paid to the government, the assessee claims the refund. Such a refund is not credited to the account of the taxpayer in case the return filing is delayed.

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