Filing ITR on time is the civic responsibility of individuals and entities. Tax authorities have the right to impose a penalty for late filing of ITR. These penalties reinforce the importance of adhering to tax deadlines.
An income tax return is a document that provides information about individual or business earnings through the period of the financial year. It is proof that the income generated throughout the fiscal year is legitimate.
There are various tax rates for different income slabs. Income tax returns or ITR can be filed online and offline. The income tax department also sends reminders or notifications to ensure that everybody files their income tax on time.
However, sometimes individuals or entities forget to do income tax e-filing on time. In that case, they need to pay fines and penalties.
In this blogpost, we will understand in detail the penalty for late filing of ITR.
What is the Penalty for Late Filing of ITR?
There are severe ITR filing last-date penalties, which are listed below:
Penalty Under Section 271H
As per Section 271H of the Income Tax Act, if the taxpayer fails to file TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) returns on time, then he needs to pay the penalty or fine ranging from ₹10,000 to ₹100,000. Further, they must also pay a fine of ₹200/day until the tax is paid.
Penalty Under Section 234F
Further, Section 234F of the IT Act states that if the taxpayer files the income tax return after the due date but before the end of the assessment year, i.e. 31st December, then they are liable to pay a penalty of ₹5,000 if the gross income is above ₹5 lakhs.
However, if the taxpayer files an ITR after the assessment year, the penalty would be ₹10,000. Also, if the income is below ₹5 lakhs, the maximum fine would be ₹1,000.
Under 234A of the Income Tax Act, if the taxpayer forgets to pay tax prior to the due date and has a tax charge or dues of over ₹10,000, then he has to pay the interest penalty of 1% every month until the dues is paid.
Other Consequences of Filing ITR After Due Date
There are other repercussions and consequences, apart from the ITR late filing penalty or fines. Let's have a look at these consequences.
Other than paying late fees for ITR, you will have to face another consequence: delayed refunds. Sometimes the TDS for individuals or entities gets deducted even if their income is under the basic exemption limit.
In that case, by filing an ITR, individuals will get the return on time from the government. However, if you have filed the ITR after the due date, you will get your refunds late.
Delay in Filing Revised Returns
Another consequence other than paying ITR late filing fees is a delay in filing revised returns. Making mistakes while filing the ITR is common since the process can be challenging. In that case, individuals have time to file the revised return after rectifying the mistakes within the decided time frame. But if you fail to file an ITR on time and you supposedly make any mistake in the ITR, then the revised return will also get delayed.
Limitations to Setting Off Losses
Further, another significant consequence other than paying late fees for filing the ITR, is that taxpayers cannot carry forward losses from business or profession. However, if the losses arise from the house property, then it can be carried forward.
Lastly, if the taxpayer did not file ITR on time or failed to file ITR, then the income tax department has the right to initiate legal proceedings against the defaulter. However, the authorities first send out multiple legal notices to taxpayers, and if they fail to respond, they can start legal proceedings.
If a taxpayer turns out to be guilty, it can lead to 3 months to 2 years imprisonment. Further, they also need to pay the fine to the authorities.
Tips to Avoid Penalties or Late Fees for ITR
Here are some tips that can help taxpayers to avoid the ITR filing penalty:
- It is best to keep track of the due date and file ITR on time.
- Use the correct income tax form as applicable to your income.
- It is best to disclose everything while filing an ITR, including your gross income, interest, capital gains, rent, etc.
- Ensure that all the filled details are correct and accurate to avoid any penalties.
Timely submission of ITR is necessary to avoid any penalties and fines. If an individual fails to do income tax e-filing on time, then it can lead to severe repercussions. Also, an individual must file income tax on time to avoid difficulties in obtaining loans and other financial services. With that in mind, always file your income tax returns on time.