It should be noted that there are 2 things which a taxpayer is required to comply with every year:
- Payment of Income Tax
- Filing of Income Tax Return
Delay in any of the two compliances results in levy of interest and penalty for the delay in compliance.
Interest on Late Payment of Income Tax
Income Tax is required to be deposited with the Government in installments during the same year in which the income is earned. The income tax would be levied as per the income tax slab rates on the estimated income of the taxpayer and tax would be required to be paid on such estimated income.
The balance tax on the difference between estimated income and the actual income would be required to be paid at the end of the year.
This payment of income tax in installments during the same year in which the income is earned is called as Advance Tax. In case this Advance Tax is not paid as per the Schedule prescribed by the Government, interest would be levied @ 1% per month. It should be noted here that ITR cannot be filed till the time full income tax has been paid by the taxpayer. ITR can only be filed once full income tax has been paid by the taxpayer.
Penalty for Late Filing of Income Tax Return
If the ITR is not filed before the due date of filing of ITR, a belated return under Section 139(4) can be filed at any time before the expiry of 1 year from the end of the relevant assessment year. Therefore if the income is earned in the financial year 2013-14, the assessment year for the same would be 2014-15 and the return can be filed at any time before the expiry of 1 year from the end of relevant assessment year i.e. anytime before 31st March 2016.
However, the income tax officer may levy a penalty of Rs. 5000 under Section 271F for late filing of income tax return. This penalty is not levied in all cases and is at the sole discretion of the assessing officer.
At the time of late filing of ITR , you won’t be required to pay this Rs. 5000 as penalty for late filing of ITR. However, in case you receive a notice from the income tax officer for late filing of ITR, in such a case you would be required to pay Rs. 5000 for late filing of ITR. In extreme cases, where the taxpayer wilfully fails to furnish the return in due time, may also levy penalty under Section 276CC :
- In a case where the tax is less than Rs. 25 lakhs- the income tax officer may penalise with imprisonment for a term of 3 months to 2 years
- In a case where the tax exceeds Rs. 25 lakhs- the income tax officer may penalise with imprisonment for a term of 6 months to 7 years.
However, these penalties are levied in a very rare case. In most of the cases, the taxpayer is only required to pay interest @ 1% for late deposit of income tax.
Consequences of Late Filing of Income Tax Return
Apart from penalty of Rs. 5000 which an income tax officer may levy for the late filing of an income tax return, there are several other drawbacks of late filing of ITR which have been discussed below:-
- Loss of Interest on Refund: If a refund is due to a taxpayer, interest on such refund won’t be paid for the period of delay in filing of income tax refund.
- Revision of Belated Return not possible: If the ITR has been filed after the due date, such return cannot be revised by the taxpayer himself in case of any error.
- Some Deductions under Section 80 are not available in case of late filing of ITR.
If ITR is not filed before the due date, the taxpayer won’t be allowed to carry forward losses arising under various heads except loss under head House Property and unabsorbed depreciation.
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