As per the Income Tax Act, it is mandatory to file your income tax returns on time. Failure to do so can attract hefty penalties and you could face a hard time getting a loan, visa approval, etc. On the other hand, timely filing of your Income Tax Return (ITR) opens the door to various advantages.
Let us understand the consequences of late filing your ITR.
As a responsible and compliant citizen, you must file tax returns. The following is the list of advantages of doing so:
If you are wondering “what happens if I fail to file the ITR on time” take a look below. Here are certain consequences of late filing of ITR:
One of the major consequences of late filing of ITR is that you will have to pay a penalty. Under Section 234F, if you fail to file your ITR within the due date, a late fee of Rs 5,000 will be applicable. However, if your annual income is less than 5 lakh, the late fees would be limited to Rs 1,000.
However, if your gross income is less than the basic exemption limit, you will not be required to pay any penalty.
In a scenario in which you have incurred losses in your investment, you can use them to offset against next year's income. As a result, it will reduce your tax liability in the next financial year. To carry forward and set-off losses, it is mandatory to declare them in your ITR before the deadline. If you file your tax return late, you will not be able to carry forward and set-off these losses against future profits. Although, you can carry forward the losses relating to house property.
As per Section 234A, if you don't pay your taxes on time, you will be liable to pay an interest of 1% per month on the outstanding tax amount. This interest is calculated from the date you file your return for the relevant financial year till the due date. Here's an example to help you understand:
Let's say you owe Rs 2 lakh in taxes for the financial year 2022-2023. The deadline to file your tax return is July 2023, but you end up paying it in March 2024, which is eight months later. In this case, you will be charged Rs 16,000 as interest (2 lakhs × 8%). This interest amount of Rs 16,000 will be added to your tax liability. So, the longer you delay in paying your taxes, the more your tax liability increases.
If you fail to furnish your ITR and your income tax liability is more than Rs. 25,000 you shall be punishable with rigorous imprisonment of minimum 6 months upto 7 years and with a fine. In any other case( i.e. tax liability is less than Rs.25,000) you shall be punishable with rigorous imprisonment of minimum 3 months upto 2 years and with a fine.
Take a look at the due dates for filing income tax return for the financial year 2023-2023.
Category of Taxpayer | Due Date for Tax Filing (FY 2022-23) |
Individuals & HUFs (Audit cases) | 31st October |
Individuals & HUFs (Non-audit cases) | 31st July |
Firm, LLP, AOP, BOI, AJP, Local Authority, Co-operative society (Audit cases) | 31st October |
LLP, BOI, Co-operative society, Local Authority, AOP, Firm, AJP (Non-audit cases) | 31st July |
Companies | 31st October |
In conclusion, it is clear that every individual and company needs to file their income tax returns on time to avoid the consequences.
It is crucial to file income tax returns on time to avoid penalties and take advantage of benefits like quick loan approvals and tax refunds. Late filing incurs penalties, loss of carrying forward losses, interest charges, and possible prosecution for serious delays. The due dates for filing income tax vary based on taxpayer categories.