The last date for filing of returns is July 31. For 2018-19, the last date filing Income Tax returns was extended to August 31, 2018. If you fail to file your returns by the final due date of a financial year, the Income Tax department will penalise you in specific ways.
According to the amended rules of Section 234F which came into effect from April 1, 2017, delay in payment of Income Tax returns can mean that you are liable to pay up to Rs 10,000 as penalty depending on when you file Income Tax your returns.
Also, if you are late in filing your returns, you also have to pay interest on the unpaid tax. This interest will be calculated on the outstanding tax and will increase with the delay in filing returns.
A delay in filing IT returns would further mean that the taxpayer will lose certain other privileges he is entitled to.
These rules have been brought in by the Income Tax department so that taxpayers file their dues on time. Hence it is important to file Income Tax returns on time to avoid these penalties.
Different Types of Income Tax Returns To Be Filed Under Section 139 of the Income Tax Act 1961
Section 139 of the Income Tax Act deals with the late filings of different types of returns. If a person or an entity has not filed their income tax returns during the specified deadline, Section 139 provides the guidelines to file such returns. Different subsections of Section 139 are meant to deal with separate tax paying entities not filing their returns on time. Here we will focus only on those subsections of Section 139 which deal with the individual taxpayer.
Section 139 (1): Mandatory and voluntary returns
Under section 139(1) tax filing is mandatory for the following individuals.
- Every person who has a total income that exceeds the exemption limit is liable to file Income Tax Return within the due date
- In the case of any resident who has an asset located outside of India (might include financial interest in some entity as well) or if any resident retains signing an authority for an account based outside India, tax return needs to be filed mandatorily even if the income falls below the exemption limit.
If filing Income Tax is not mandatory for an individual then income tax filed by that individual is known as voluntary returns. Voluntary returns are considered valid returns under Income Tax laws.
Under Section 139(1c), certain classes of people are exempt from filing income tax. If these classes of people fulfil the prescribed conditions, the central government is empowered to grant them tax exemption.
Section 139(3) – Filing Income Tax returns in case of Loss
The filing on Income Tax returns in case of loss is governed
By Section 139(3) of the Income Tax Act. This section states that in case a taxpayer has incurred a loss in the previous year, it is not mandatory for him or her to file a return for the same.
There are, however, certain provisions that one needs to keep in mind.
- If the loss arises under the head ‘Capital Gains’ or ‘Profits and Gains of Business and Profession,’ filing tax returns by the due date is mandatory in case a taxpayer wants to carry forward the loss and offset it with future income.
- However, in case of loss arising under the head house property, the loss is allowed to be carried forward even if the returns are not filed by the due date.
- In case of loss arising from any other income during the same year, it is allowed to be set off even if returns are not filed on time.
- Although the loss of current year cannot be carried forward as per Income Tax laws, unless the return of the loss is submitted before the due date, the loss of earlier years can be carried forward if the return of the loss of that year was submitted by the due date and such loss was processed.
Section 139(4) – Late Income Tax Return
If an assessee is unable to file returns by the due date as mentioned in section 139 (1), the assessee can still file belated returns within a period of one year from the assessment year or before the completion or conclusion of the assessment as per Section 144, depending on which takes place earlier;
However such assessees may incur a penalty of Rs 5,000 as prescribed under Section 271F of the Income Tax Act, 1961. However for those for whom returns were not required to be filed mandatorily as per as provisions under Section 139 (1) even if the returns were filed after the year of assessment was over will not have to pay the penalty.
Section 139(5) – Revised Return
In case you file your I-T by the due date, but later realise that there has been an error, you have the right to file a revised income tax return within a period of a year following the expiration of the assessment year of relevance or prior to the completion or conclusion of assessment, depending on is sooner. There is no restriction on how many times an amended return can be filed during this time. However, a late or overdue return will not fall under this section and cannot be revised.
The revised return can be filed in the same original Income Tax form or a different return form. Once an amended return s filed under Section 139(5) this return becomes valid, and the previous return filed under section 139(1) does not hold true.
Revision of returns can only be done if the ‘omissions’ or’ wrong statements’ are unintentional. If such mistakes or omissions are intentional or are a result of the fraudulent filing, a penalty will be issued on the taxpayer.
Section 139(4a) – Income Tax Return of Charitable and Religious Trust
In case you receive income from a public charity or religious trust that claim exemptions under Section 11 and Section 12 of the Income Tax Act, then it is mandatory to file your income tax returns as a private citizen, provided the sum of the income collected before the provisions under Section 11 and Section 12 is beyond the basic limit allowed for exemption.
Section 139(9) – Defective Returns
As per provisions under Section 139(9) of the Income Tax Act, a tax return is defective if certain documents are not attached while filing the tax return. There are certain situations when you Income Tax return may be considered defective. If you leave some of the mandatory fields empty when filing your returns, it may be considered defective. Also if you do not submit proof of claims on paid taxes whether it is tax deducted at source, advance tax or self assessment tax, a return would be considered defective.
When a return is considered defective by the tax officer, the taxpayer in question will be informed and will be allowed to rectify the defect within 15 days of intimation. This is conveyed to the tax payer through a letter. This period can be extended if the taxpayer requests through an application. If the taxpayer does not rectify the defect in the given time frame or the period of extension granted to him, the return ceases to be valid.
The disadvantage for late filing of ITR
Failing to file one’s tax returns by the final due date comes with certain disadvantages:
According to Section 234F, if you fail to file your returns on time, you have to pay a penalty of up to Rs 10,000. If the Income Tax returns are filed after the return filing deadline but before December 31, the penalty would be Rs 5,000. If the returns are filed on or after January 1, the penalty goes up to Rs 10,000. However, if the total income of the taxpayer is less than Rs 5 lakh, the amount of penalty will be a maximum of Rs 1,000, a move meant to provide relief to the small taxpayer.
If you are late in filing your taxes, you cannot carry forward your losses (except loss from house property) from ‘Capital Gains’ or the ‘Profits and Gains of Business/ Profession’.
If you are late in filing your taxes, you also have to pay an interest on unpaid tax as we discuss in the next paragraph.
Further, if you are eligible for refund and interest on that refund, you will not be receiving any interest on the refundable amount if you do not file your tax returns on time.
Interest on Late Filing of Income Tax Return
If you delay in filing your Income Tax returns you will also have to pay an interest apart from the penalty for late filing. This means that if you have taxes unpaid taxes to be paid and you have not filed your taxes by due date, you will be penalised.
Under Section 23 4A, you will be charged an interest amount of 1 per cent per month or part of the month of simple interest on the tax amount outstanding. The interest will be calculated from the due date for filing taxes in that financial year to the date when you actually file your return.
Suppose the due date for filing of taxes in a certain financial year is August 31 and you file your taxes on December 30. In case your total outstanding is Rs 1,00,000 ( after taking into account advance taxes and TDS), interest will be charged at 1 per cent for 4 months. The total interest payable is thus Rs 4,000.
When do I have to interest penalty on my delayed returns?
If you miss your return filing due date you have to pay a penalty on your outstanding taxes if any. However you have to pay an interest on your unpaid taxes only if you have some tax outstanding.
Can I carry forward losses if I do not file my returns on time?
As per as Income Tax Laws, losses under any head of income under ( other than income from house property) can be carried forward only if the return is filed during the due date. Otherwise carrying forward of losses is not allowed. Loss under the head ‘income from house property’ is allowed to be carried forward even if the Income Tax return is not filed on time.
Do I lose interest on refunds if I am late in filing my taxes?
Even if you are not penalised for filing your taxes, you will lose interest on refunds you are eligible for. One is eligible to earn interest on the refund from the Income Tax department at the rate of 0.5 per cent per month starting from April 1 of the assessment year till when the refund is granted. If you do not file your returns on time, you stand to lose this interest.
Under which situations is it mandatory to file returns on time?
You should always ensure that you file your Income Tax returns by due date if your income exceeds the exemption limit. Filing your Income Tax returns on time becomes very important if you have to deposit balance tax, you are expecting a huge refund or need to carry forward your losses.