Missed July 31 deadline? You can still file I-T returns till December 31 but with late fee and penal interest

Missed filing ITR by July 31? You can still do so by December 31, but at a price

The income tax (I-T) department has reached a new milestone with over 6.50 crore income-tax returns (ITR) filed as of 6 pm on July 31. Despite this achievement, there may be many individuals who missed the deadline to file their return.

If you are among those who failed to file their ITR within the deadline, you can still file it after the due date but be prepared to pay penalties and interest on due taxes. Additionally, there are a few limitations associated with filing a belated return.

Also read: The consequences of missing the July 31 deadline 

July 31, the due date
As per Section 139 of the Income Tax Act 1961, the due date for filing tax returns is July 31 of the relevant assessment year for all assesses, except for companies and individuals whose accounts need auditing, among others.

Therefore, for individuals with income from salaries, small businesses, and professionals in the financial year 2022-23, the due date for filing their income tax return was July 31, 2023.

Belated return 

If an individual who is required to file their return before July 31 fails to do so within the prescribed time, they have the option to file a belated return under Section 139(4) of the Income-tax Act.

A belated return can be submitted at any time up to three months before the end of the relevant assessment year or before the completion of the assessment, whichever comes earlier.

In simpler terms, for the financial year 2022-23, a belated return can be filed until December 31, 2023, which is three months before the end of the assessment year 2023-24, concluding on March 31, 2024.

It is essential to note that filing a regular return and filing a belated return differ.

Penalties for belated return

Late submission of returns incurs penalties in addition to interest.

If your total income to be reported exceeds Rs 5 lakh, a penalty of Rs 5,000 will be charged for the delay in filing the return. On the other hand, if your total income is less than Rs 5 lakh, the fee payable is up to Rs 1,000.

It's important to note that after December 31 of the assessment year, you cannot voluntarily file your returns. In case the I-T department selects your return for scrutiny later, they will inform you about the necessary actions to be taken.

Also read: Moneycontrol's one-stop ITR filing guide

Penal interest on due taxes
Delay in filing tax returns not only attracts a penalty but also incurs interest if income taxes are due. Section 234 of the Income Tax Act deals with penalties for late tax payments.

The interest penalty starts from the first instalment of advance tax, which is paid in four instalments on June 15, September 15, December 15, and March 15 of the financial year. Failure to pay advance taxes on time results in a 1 percent penalty per month or part thereof on income taxes due until the end of the financial year.

If you don’t pay 90 percent of the advance tax by March 31 of the financial year, interest under Section 234B starts ticking from April 1. Therefore, experts advise filing your tax return early (between April 1 and July 31) to avoid interest charges.

If you have to file a belated tax return by December 31 of the assessment year, interest under Section 234A at 1 percent per month or part thereof will be charged on the unpaid tax amount starting from the day after the due date, i.e., July 31, 2023, for AY 2023-24.

From August onwards, a total of 2 percent interest (under Section 234B and 234A) will be charged on due taxes per month or part thereof until you pay the tax and file the return.

How long should you preserve tax-related documents?

Once you file your income tax return, you should keep the documents related to income, expenses and deductions claimed in the return. The I-T department may pick your return for assessment in case they find any discrepancies.

“The assessing officer has the option to carry detailed scrutiny of the return of income as well (known as Scrutiny assessment) to satisfy himself in relation to various claims, deductions, etc, made by the taxpayer in the return. The tax officer can serve a notice under Section 143(2) of the Income Tax Act on the taxpayer within a period of three months from the end of the financial year in which the return is furnished,” said Yeeshu Sehgal, Head of Tax Market, AKM Global, a tax and consulting firm.

For example, if a return for FY 2022-23 has been furnished by an individual taxpayer on or before the due date (let’s say, on or before 31st July 2023), it can be selected for Scrutiny by issuing a notice by the tax officer till June 30, 2024, that is, within 3 months from the end of the financial year in which the return is furnished.

But it doesn’t end with it, the I-T department can reopen the case, even after several years if they find there is income that has not been reported and tax has not been paid.

“Usually, the Act does not prescribe a time limit for maintaining books of accounts in case of a person carrying on Business. In any case, the department can reopen assessments (Income Escaping assessment) for a maximum period of up to 10 years. Therefore, maintaining books of accounts for such a period is recommended,” said Sehgal.