The digital age has transformed the lives of everyone all over the world. In India, people have started using digital platforms to the best of their abilities in order to achieve better and faster results in a broad spectrum. E-filing of income tax returns has resulted into easy and faster completion of the whole return filing process and this helps to fuel the increasing number of people filing their returns online, year after year.
When it comes to filing of income tax returns, many people would have forgotten to file for the previous year while some would have not bothered about filing their returns till date. And when the need arises, the first question that comes to their mind is “Can I file income tax returns for previous year now?”
Well, there is no need to panic. If you have missed the last due date for filing your returns, you can still file for a belated returns for the previous year. An individual can file his or her tax return until the completion of two financial years from the end of the financial year for which the return is to be filed. Let’s understand this through an example:
Neha wants to file her income tax return for the financial year 2014-15. Financial Year 2014-15 ends on 31st March 2015. So she can file this return until the end of FY 2016-17 (Two years from the end of 31st March 2015). To put it in simple words, Neha can file her return for FY 2014-2015 till 31st March 2017.
This means that if two years have elapsed since completion of the financial year for which you wish to file your return, you would not be able to file the same.Consequences of late filing:
If you do not have any tax liability or if you have a refund, then there will be no penalty or interest on late filing of return. However if you have a tax liability, you will have to pay the normal interest (under Section 234A of the Income Tax Act) at 1% of the tax liability for each month, or part thereof for delay in filing the return. If you are liable to pay advance tax as per the Income Tax Act, you will have to pay the interest on default in payment of advance tax under Section 234B and the interest on deferment of advance tax under Section 234C.
Now let’s talk about a situation where you wish to file your returns for both, last year (which you forgot or did not file) and the financial year that just ended. There is no mention in the Income Tax Act that an individual cannot file his or her income tax returns for the previous year and the last financial year, at the same time. So a person can file both the returns simultaneously. However, while doing so, it is advisable to file the belated return first. The logic behind doing this is that if you incurred any losses in the previous year, the benefit of set off and carry forward of such losses will be allowed only if you’ve filed your return. So the logical path is to carry forward those losses in the belated return and set them off in the current return year.
Now let’s have a look at some of the reasons why you should file your returns regularly.Advantages of filing your return:
• It becomes your standard income proof
• You can have loans sanctioned quickly and easily
• You can trade in stocks, open bank accounts, get bank credits, make investments etc. And you can do all of these with ease if your financial rating is positive in the financial institutions books by simply filing your tax returns
• You can claim your refunds for taxes deducted or paid in excess of your tax liabilities
• Many foreign countries want to know how financially sound you are before they grant you with a visa. So to prove your financial worth, Income tax returns are must
• Not to forget, it is your obligation. The taxes you pay on your income will work towards betterment of our nation
• For professionals and business organisations, income tax returns are a must for eligibility for certain tenders applicationsDisadvantages of not filing your return:
• If you do not file your return in time, you will have to pay interest on your tax dues when you file at a later date
• If you have incurred losses, you cannot carry forward the same to subsequent years, if you do not file your return
• You could become liable for a penalty or prosecution by the income tax department if you conceal or fail to disclose your income
E-filing has made the whole returns filing process easier and faster. The processing time taken by the department for each return has come down substantially resulting into faster issuance of refunds. For all your e-filed returns, you can check ITR V (Acknowledgement) status and also the refund status at any time subsequent to e-Filing.Author is a qualified chartered accountant and co-founder at Quicko.com, an online tax preparation entity.