Why Should You File Your Income Tax Returns On Time?
Every new year ushers in new changes. As we welcome 2018, it makes sense to recap and understand this very important topic of income tax filing which is an annual affair for us. A familiarity with the latest rules keeps everyone in good stead.
When to File the Returns?
Income Tax Returns for a financial year must be filed on or before the 31st of July of the next financial year. For e.g. the returns for Financial Year 17-18 should be filed by 31st July 2018. Sometimes this date gets extended by a few days to make sure tax-payers get ample time to file the returns.
What Are Belated Returns?
Any return filed after the official due date is a belated return, and it comes with its own consequences. You lose out on your money and your peace of mind in more ways than one.
Previously, the window for filing a belated income tax return was up to two years from the end of the relevant Financial Year. The Government, in a bid to increase tax compliance, amended the Finance act in Financial Year 2016-17 and has now shortened this period to one year. It means that the belated returns for Financial Year 2016-17 can be filed only up to 31st March 2018.
What If You Do Not File Your Income Tax Returns On Time?
Besides suffering the stress of your impending returns, there are monetary penalties that you might have to occur if you delay the filing. Further, the erring taxpayers might have to answer the Income Tax department notices or even have to get their tax records scrutinized by the department. With the entire system getting computerized, it is becoming easier for the concerned professionals to catch the defaulters.
The consequences of a delayed return can range from financial penalties to scrutiny by the tax department. Have a quick look at the details of the penalties:
- Interest On Unpaid Amount
If there is some pending tax amount from your end, you will be charged an interest of 1 percent per month on the unpaid tax. This interest is calculated from the due date of filing the return to the actual date when you have filed the tax.
Sometimes you might face additional distress if your unpaid tax is amounting to more than Rs. 3000 remains unpaid beyond the concerned assessment year tax authorities can initiate prosecution.
- Penalty On Unpaid Amount
For returns of Financial Year 2017-18 and ahead, the fine of Rs 5,000 will be levied for returns filed between 1st August and 31st December 2018. After this period, a fine of Rs 10,000 will be charged. If your income is less than five lakhs, you will be charged Rs. 1000 in this case.
- Loss In Interest On Refunds
If you have filed advanced tax and are expecting a refund, non-filing of returns will lead to loss of some portion of interest paid by the Income Tax department on the refund amount. A belated return means the interest will be calculated from the actual date of filing the return (usually after 31st July) to the date when the refund is granted. In case the return was filed on time, the interest would have been calculated from 1st of April to the date when the refund is granted. This translates to a loss of interest for at least four months (from April to July).
- Carrying Forward Of Losses Not Allowed
Both long and short-term capital losses can be carried forward for eight assessment years immediately following the assessment year in which the loss was written down in the books. However, if you do not file your Income Tax Returns for the assessment year in question, you will not be able to carry forward these losses so that they can be set off against the gains. It does not matter if you have paid the taxes unless you’ve filed the return. This stands true for most losses except for those on house property.
- Belated Returns Cannot Be Revised
Filing of income tax is a careful exercise and sometimes errors can creep up in the process. If you have filed your returns before 31st July, you have a chance to make changes. Sadly, filing a belated return does not allow you this provision.
It’s not that all hell breaks loose if a delayed return is filed. However, it does cause major inconveniences to the tax-payer. Not to mention the nagging discomfort and mental stress of missed deadlines and possible pecuniary actions and notices. The list of consequences makes us understand and appreciate how a stitch in time saves nine. Don’t miss the deadline in 2018 and avoid such taxing times.