Penalty for Late Filing of Income Tax Return

The taxpayers have to file the Income tax return of their income earned up to 31st July of the assessment year (AY) relevant to the financial year unless extended.

The government gives a four-month window every Assessment Year (A.Y.) for taxpaying citizens to consolidate their income details for the relevant financial year and file income tax returns. The said four-month period starts on 1st April and ends on 31st July (unless extended).

It takes only a few minutes to file your ITR, therefore this is more than reasonable. In addition to paying taxes on time, we must file returns by the due date or suffer penalties. This post will go over the consequences of filing an ITR late and what to do if you fail to file an ITR.

The Due Date For Filing ITR For AY 2024-25

For the Assessment Year 2024-25, the due date for return filing as per section 139(1) is 31st July 2024 unless extended by the government.

Many taxpayers believe that they have no further obligation if they have paid their taxes. However, missing the ITR filing deadline has legal consequences. Effective from the financial year 2017-18, a late filing fee is applicable for filing returns after the due date.

Late Filing Fees u/s 234F

Effective from FY 2017-18, a late filing fee will be applicable for filing your returns after the due date under Section 234F. 

For instance, the due date for filing returns for FY 2023-24 is 31st July 2024. If you miss filing the ITR by the due date, you can file the belated return by 31st December 2024. However, you are required to pay the penalty for late filing.

The maximum penalty of Rs 5,000 will be levied if you file your ITR after the due date of 31st July 2024 but before 31st December 2024.

However, there is a relief given to small taxpayers – if their total income does not exceed Rs 5 lakh, the maximum penalty levied for delay will be Rs 1,000. 

To summarise, Section 234F

Benefits of Filing ITR on Time

Filing your ITR on time does make you feel responsible and good about yourself, but the benefits don’t end there. Filing your ITR on time can benefit you in more ways:

Easy Loan Approval

Filing the ITR will help individuals when they have to apply for a vehicle loan (2-wheeler or 4-wheeler), house loan, personal loan, etc.

Claim Tax Refund

If you have paid excess tax to the income tax department, you should file your income tax return as early as possible to process the return and receive a tax refund.

Income & Address Proof

You can use the income tax return as proof of your income and address, which is mandatory when applying for a loan or visa.

Quick Visa Processing

Most embassies & consulates require you to furnish copies of your tax returns for the past couple of years at the visa application.

Carry Forward Your Losses

If you file the income tax return within the due date, you will be able to carry forward losses to subsequent years. You can use such losses to set off against your future income.

Avoid Penalty and Prosecution

You can avoid the income tax department initiating prosecution proceedings as discussed in the below section.

Consequences of Not Filing by the Due Date

Prosecution

The income tax officer can initiate proceedings for prosecution if the person willfully fails to file a return even after issuing notices. The imprisonment can be for a term of three months to two years with a fine.

If the tax you owe to the income tax department is higher, the prosecution period may extend to seven years.

Penalty

Further, the income tax officer may impose a penalty of up to 50% of the tax due in case of underreporting income.

Apart from the penalty levied by the IT department, there are other consequences that a taxpayer may face for late filing of returns:

Unable to set off losses

Losses incurred (other than house property loss) are not allowed to be carried forward to subsequent years. You cannot set off these losses against future gains if the return has not been filed within the due date. However, if there are losses under house property, carrying forward losses is permitted.

Interest in the delay of filing the return

Apart from the penalty for late filing, interest will be charged under Section 234A at 1% per month or part thereof on tax due until the payment of taxes.

The interest calculation under the said section will start from the date falling immediately after the due date, i.e. 31 July 2024 for FY 2023-24. So, the longer you wait, the more you pay.

Delayed refunds

In case you’re entitled to receive a refund from the government for excess taxes paid, you must file the returns before the due date to receive your refund at the earliest.

ITR Not Filed for the Previous Financial Years

If you missed filing ITR for previous years. Then you have two options

1. Make an application u/s 119(2)(b) for Condonation 
2. File Updated return u/s 139(8A)

Steps to Place Condonation of Delay Request to File Previous Year Return:

Step 1: First, you will have to make an application with your jurisdictional officer for granting of condonation with the reason.

Step 2: After submission of such details, notice will be issued by the department seeking relevant information regarding the claim, which can be accessed on the income tax portal, under the ‘E-file’ tab or  ‘Pending actions’ section on the dashboard. The taxpayer can submit a reply to the notice online, either by himself or through his authorised representative (CA or an advocate).

Step 3: On approval of such an application, you can proceed with ITR filing in the income tax portal and complete the filing process.

Details about section 119 condonation of delay are available here.

File Updated Return u/s 139(8A)

Section 139(8A) under the Income Tax Act allows you a chance to update your ITR within two years. Two years will be calculated from the end of the year in which the original return was filed. ITR-U was introduced to optimise tax compliance by taxpayers without provoking legal action.

Filing of ITR-U is applicable only to those individuals where it results in additional tax liability. Thus where it results in a refund or no tax liability, then you will not be able to file your ITR u/s 139(8A).

Also, for filing of ITR U, you will be levied a penalty as follows

Filing Return Through Paper Mode (Offline) for Previous FY After the Due Date

Paper return is not an accepted mode of submission in normal cases. It is accepted where the taxpayer is older than 80 years of age, or the area in which the taxpayer resides has significant infrastructure deficiency & many are affected by e-filing. In such cases, the government will come out with explicit notifications with SOP on paper filing submissions.

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