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Last Updated : Nov 20, 2020 11:28 AM IST | Source: Moneycontrol.com

Income tax return filing: Why you should pay your taxes now despite deadline extension

Besides filing income tax return on time, it is also important to pay your taxes now. Apart from refund delays, there could be interest build-up on unpaid tax.

If you had been planning to push your income details and other bank information back in the drawer as the deadline for tax return filing has been extended to December 31, 2020 – from the existing deadline of November 30, 2020 – then think again.

Usually, the income tax-filing due date is on July 31, 2020, which was earlier pushed back to November 30, 2020, and now December 31, 2020. But these deadlines pertain to just income-tax returns filing. The taxes that you have to pay on your income earned in the year 2019-20 should have been paid by March 31, 2020, either by way of tax deducted at source (especially for salaried employees on their salary income), or advance tax (in the respective quarter), if you are eligible for it.

The interest that is applicable to the tax due to the government but not yet paid, needs to be paid from when it was due. For instance, if you were due to pay advance tax and you haven’t paid it, then the meter starts ticking from the end of that quarter when advance tax wasn’t paid.

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Sudhir Kaushik, co-founder of TaxSpanner.com, says, “People are expecting that the due date would be extended further like every year. Hence, they are relaxed. But they should understand that interest will be payable per month of delay. So, for instance, if Rs 1 lakh is payable then Rs 1,000 worth of interest is applicable per month.”

Online tax filing portals have seen hardly a trickle in the number of tax filers between September and mid-October 2020. As per the Income Tax Department Statistics, only 2.19 lakh tax returns for assessment year 2020-21 (income accounted for financial year 2019-20) have been filed so far due to the pandemic, as against the total of 6.77 crore returns received last year. The ITR-1, which is the most simple and commonly used form, has been filed by 1.15 crore people in the current assessment year, down 63per cent from the last year’s 3.13 crore tax filers.

Ahmedabad-based chartered accountant Raju Shah says, “Small taxpayers and salaried individuals have started filing their returns since October 1, 2020. Those who have not will attract interest rate on the balance tax payable. The interest applicable to pending tax payments is 1 percent per month instead of the normal interest of 1.25 percent per month. This is applicable for the first of every new month.”

So, even if you pay the balance tax on 15th of the month, the interest or the whole month would be applicable.  However, the penal interest of Rs 5,000 that is applicable for filing tax returns after due date is not applicable as the government has extended the deadline for filing tax returns to December 31, 2020.

Though the tax is deducted upfront for salaried employees, there are other incomes that some individuals declare in the tax return alone and do not report them to the employer. Kaushik enumerates, “If you have income from capital gain or income – the details of which you haven’t shared with the employer - or even rental income to be declared, then the tax liability could exceed the tax already collected by the employer. Sometimes due to the additional tax liability the tax bracket is completely shifted to the next bracket, for instance from 20 to 30 percent and then the tax liability extends further.”

Additionally, consultants and those who have changed jobs during a financial year too have high tax payable, which is assessed and paid only before filing tax returns. “In case a person has switched jobs and the tax deduction and exemption have been offered by both old and new employers, then the tax liability will be high as the tax cut by each employer would be lower than the actual tax payable,” explains Kaushik.

All these individuals need to ensure they do not wait for the last day of filing tax return that has been extended to December 31, 2020.

Similarly, for Visa proceedings too, fresh returns would be required and hence one shouldn’t wait for the new tax-filing deadline to file the returns if they are planning to travel abroad.

“If you are looking to apply for loans with banks and financers, then they would require the latest tax returns. So, returns that are delayed beyond six months after the financial year has ended wouldn’t be accepted by banks,” says Shah.
First Published on Oct 24, 2020 06:47 pm
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