Income tax returns (ITR) are to be furnished by July 31st / September 30th of the assessment year. Which means, for financial year 2017-18 (i.e. period starting April 1, 2017 and ending on March 31, 2018) the due date for filing the ITR will be July 31st, 2018 for certain classes of people, like individuals, small businesses which do not require audit by a CA. For larger taxpayers which require an audit from CA, the due date will be September 30th, 2018.
However, in case the return is not filed in time, interest and penalty would be levied for late filing of the income tax returns. Delay in both payment of income tax as well as filing of income tax returns would impose an interest and penalty on the taxpayer.
In the annual budget of 2017, the Finance Minister announced a fee for delay in filing of ITR. A penalty of Rs 10,000 would have to be paid by a taxpayer from the 2018-19 assessment year (i.e. starting financial year 2017-18) for late filing of income tax returns.
It specifies two levels of penalty in this regard. A fee of Rs 5,000 would be levied if tax returns are filed on or before December 31st of the assessment year, and a fee of Rs 10,000 in any other case.
For small taxpayers or where the total income does not exceed Rs 5 lakhs, the fee levied shall not exceed an amount of Rs 1000. This decision was taken in order to improve tax compliance and ensure smooth running of tax administration.
These amendments apply in relation to assessment year 2018-19 (ie FY 2017-18) and subsequent years.
The income tax law also provides for penalty to be levied in extreme cases where the taxpayer wilfully fails to file ITR within the prescribed time limit:
- in case where tax payable is less than Rs 25 lakhs, income tax officer can penalise with imprisonment for a period of 3 months to 2 years.
- In a case where tax payable is more than Rs 25 lakhs, penalty could be imprisonment for a period of 6 months to 7 years.
Above cases however are extremely rare. In most cases, taxpayers are required to pay interest at 1% per month, depending upon the number of months for which the delay is made.
Consequences of late filing of ITR:
In addition to the penalty payable, there are other drawbacks of delaying the filing of ITR
- Some section 80 benefits are not available in case ITR filing is delayed.
- Loss of interest on refund: if a refund is payable to the taxpayer, interest on such refund may not be paid to the taxpayer for the period of delay in filing of ITR.
- If the ITR is filed after the due date, such return cannot be revised by the taxpayer himself in case of any error.