Individuals who are having income exceeding the basic tax exemption limit are mandatorily required to file their tax return, under the Income Tax Act. The due date to file tax return for the immediate past Financial Year was July 31 each year. However, tax return can also be filed after the above due date as “belated tax return”. However, the Finance Act, 2016, has stipulated that belated returns can be filed within one year from the end of relevant assessment year (AY) or the completion of the assessment, whichever is earlier. So, for the Financial Year (FY) 2016-17 (Assessment Year 2017-18), the due date for a belated return is March 31, 2018, which is just gone by now. What should you do if you have still not filed your returns for 2016-17 and what consequences you might face if returns have not been filed?
Alok Agrawal, Senior Director, Deloitte India and Milind Halgekar, Manager at Deloitte Haskins & Sells LLP listed out the following implications of not filing the ITR on time:
=> Interest of 1% on the balance tax payable for each month of delay in filing a tax return.
=> From FY 2017-18 onwards, in case return is not filed within the due date, a fee of Rs 5,000 is applicable and if it is delayed beyond December 31, of the relevant assessment year then it is Rs 10,000. However, this will be restricted to Rs 1000 in case of individuals with income up to Rs 500,000;
=> Assessee will lose the ability to carry forward any eligible losses;
=> Will also lose out on claiming a refund of any excess taxes paid and consequential interest;
=> In case of failure to file a tax return from FY 2016-17 onwards, a penalty of 50% of tax payable (as under-reported income) is applicable;
=> There may be penalties under the Black Money Act for an individual who is ordinarily resident and has/had foreign income/ asset;
=> In case of serious willful attempt to evade taxes, rigorous imprisonment may be considered by the tax authorities which may extend to 7 years;
Apart from the above, the tax return may also be required as documentary evidence for any application for visas or for loans, etc.
While one should endeavour to file a tax return within the due dates, the applicable taxes should definitely be deposited into government treasury along with applicable interest if the return has not been filed for any reason.
Such payment should be communicated to the jurisdictional tax officer by filing a letter along with tax paid challan. In an event where it is noticed by tax authorities that the individual has not filed the tax return, but applicable taxes are already paid by way of tax deduction at source, advance tax or self-assessment tax, Revenue Authorities may choose to not to levy penalty (as indicated earlier, fee for delay in filing tax returns from FY 2017-18 would still be applicable).
Agrawal said that there are certain types of income on which tax may not be deducted at source, e.g. interest from savings bank accounts. In such cases, one must remember to pay the applicable taxes and inform authorities. Also, in case you have paid excess tax and also have carry-forward of losses, it is possible to approach tax authorities with an application for condonation of delay, subject to certain conditions. “This can be possible only if robust documentation can be provided to support the tax payment claims and also to demonstrate that there was a reasonable cause due to which the return could not be filed within the due date,” he said.