Merely
paying the due amount of tax is not sufficient. In addition, the
Income-tax rules require a taxpayer to also file return, irrespective of
whether tax is due or not. Therefore, for all those with income above
the exempted limit, tax return filing within the due date is a must.
Every year, July 31 is the date by which
taxpayers are supposed to file their I-T returns (ITR). But as it has
happened in quite a few previous occasions, the deadline this time was
again extended till August 5, 2016, for the assessment year 2016-17,
which pertains to income earned in the financial year 2015-16. Suraj
Nangia, Partner, Nangia & Co, says, "With less than 3 per cent of
people in India filing tax returns, the perception amongst most is that
since TDS (tax deduction at source) has happened, filing of tax returns
is not important. Many taxpayers also often take it easy as an
income-tax return for FY 2015-16 can be filed by March 2018."
Despite repeated reminders by the I-T
Department and the extension of the due date, there could be some
taxpayers who have failed to file their returns. We will not go into the
reasons here, but let's see the implications for those who have missed
the last bus.
Belated returns can be filed by...
Filing ITR after the due date is called
belated return. It can be filed before the end of the relevant
assessment year or before completion of the assessment, whichever is
earlier. Dr Suresh Surana, Founder, RSM Astute Consulting Group,
informs, "If an individual misses the deadline of August 5, 2016 for
filing return pertaining to FY 2015-16 (AY 2016-17), he can file a
belated return by March 31, 2018."
But even if one is unable to file one's
return, at least the taxes, if any, should be paid. Swami Saran Sharma,
Director & CEO, InsuringIndia.com, suggests, "The best scenario is
to pay your taxes and file your return in time. But in case one is not
able to file the tax return due to some reason, it is advisable to
calculate and pay the tax due before the scheduled date of filing the
ITR. If all your taxes are paid, you do not attract any penalty even if
the return of income is filed anytime before March 31 of the following
year."
Penalty for belated filing
Not
filing your return on time means you are liable to the penalty and
prosecution provisions under the I-T Act, if taxes are unpaid. If you
have not furnished the return within the due date and you have tax dues
to be paid, you will have to pay interest on the due amount of tax as
well. Nangia informs, "Penalty is levied by the tax officer in cases
where the taxpayer fails to file his return before the due date. Under
Section 271F, the tax officer may levy a penalty of Rs 5,000 for
failure to furnish return of income. The penalty for any delay beyond
August 5 is not levied automatically and is at the sole discretion of
the tax officer. In extreme cases, where the taxpayer willfully fails to
furnish the return in due time, the tax officer may penalise with
prosecution, however, such instances are rare."
Interest on due amount of tax
If one hasn't filed on time and has due
amount of tax, then interest under Section 234A will have to be paid.
Nangia says, "Such interest is levied for delay in filing the return of
income. In other words, if the taxpayer files the return of income after
the due date, simple interest of 1 per cent per month or part of a
month is levied." And the calculation of interest starts from the very
next day from the due date. Surana says, "The interest applies from the
date immediately following the due date, ending on the date of filing of
return. For the purpose of this calculation, part of the month shall be
considered as whole month."
Lesser time for those who file late returns
Starting FY 2015-16, the rules for filing
belated returns have changed. Nangia informs, "In any one financial
year, a taxpayer can file returns for previous two financial years.
Therefore in FY 2016-17, a taxpayer can file tax returns for FY 2014-15
and FY 2015-16. Hence any return which pertains to FY 2013-14 and before
is time-barred and under no circumstances can be filed. A notable
change brought about during Budget 2016 is the reduction of time period
for filing of belated income-tax returns. The period of filing belated
returns has been reduced from two years to one. Accordingly, from the
next assessment year, i.e., FY 2016-17, taxpayers will need to file
returns before the end of the relevant assessment year." So, make it a
habit to file I-T returns on time as the window to file belated returns
will be less now.
Lost Opportunities
No time to revise
If you want to change some figures in your tax return (FY 2015-16), you
can do so by filing a 'revised return', provided you had filed on time.
Revision of a belated return is not allowed. So if you haven't taken
credit for a deduction under chapter VI (Section 80C, etc.), there's no
way I-T Department will allow that now. Also, if the Department points a
mistake, you may be asked to pay a penalty.
Refund without interest
If you are eligible for a tax refund, you will get it but only from date
of filing of belated return. By filing a belated return, one loses on a
portion of the interest on the tax refund amount. The I-T Department
pays interest of one-half per cent for every month calculated from April
1 of the assessment year. Even the refund process may get prolonged.
Surana adds, "Late filing of return of income would result in delayed
processing of refund."
Unable to set-off losses
Losses incurred can be carried forward to future assessment years to be
set-off against future gains. However, if you have sustained a loss in a
financial year, which you propose to carry forward to the subsequent
year for adjustment against subsequent year(s) positive income, you must
make a claim of loss by filing your return before the due date. Surana
says, "Loss (except house property loss) can be carried forward and set
off in future years only if the return has been filed within the due
date of filing return of income."
Conclusion
As a word of caution, Surana says, "Be
careful while filing the return so that you don't have the option of
filing a revised return. If a person files a belated return, he needs to
fill up the income-tax return carefully to avoid any omission or error
as the belated return once filed cannot be revised."
Once you have filed the belated return,
don't forget to complete the verification process as the acknowledgment
ITR-V has to be sent to I-T Department. One may follow the
e-verification process to do the same immediately after filing. Surana
says, "It may be noted that while there is no specific limit for
electronic verification, it seems that time limit of 120 days in case of
sending ITR-V by post could be applicable in case of electronic
verification also."
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