Putting Off Income Tax Return Filing? Be Prepared For Heavy Fines
Filing income tax returns is an essential task for taxpayers.
Almost every taxpayer is aware of the repercussions of delaying their ITR filing. Typically, a delay on the part of taxpayers subjects them to high interest and penalty charges. Even though the due date of ITR filing has been postponed from 31 July to 31 December for 2020, we suggest you file your income tax returns before the last date, to avoid penalty and other complications.
Read on to find out the consequences of delaying or missing out on the ITR filing date!
What Happens When You File ITR Late?
These pointers below explain the repercussions of delaying income tax return filing –
Under Section 234, filing ITR post due date attracts a late penalty. Typically, in a year when the due date is 31 July, taxpayers can file their ITR by 31 December. However, in such a case, you will have to pay a late fine of Rs. 5000. Beyond this, you will be required to pay a penalty of Rs. 10000.
However, if your annual income is not more than Rs. 5 lakh, the late fine amount will be limited to Rs. 1000. Since this fiscal year is an exception, the late penalty of Rs. 5000 is inapplicable altogether. Notably, post 01 of January and until 31 July, the penalty will be applicable again. So, ensure to file your ITR on time without getting into such liabilities.
Salaried individuals will be required to pay interest under Section 243B, if they have an unpaid tax amount. Notably, if an individual has paid a portion of due tax either on or before 30 June 2020, they would pay an interest of 0.75% each month.
Additionally, they will have to pay 1% interest on the remaining tax amount. Regardless, taxpayers having an unpaid self-assessed tax that is more than Rs. 1 lakh, will pay an extra 1% each month from August of 2020, until ITR is filed.
Fine And Imprisonment
Suppose you miss out on filing ITR on time and have taxable income, you will be subject to a penalty ranging from 50% to 200% of the assessed tax amount. Furthermore, you may have to face legal consequences, such as imprisonment for up to 7 years or paying a hefty fine, if the amount of tax evaded exceeds Rs. 25000.
Losing Tax Benefits
Usually, businesses are allowed to claim tax deductions under Section 80C. This includes deductions on –
- Life insurance premiums
- Repayment of home loan principal amount
- Investment in ELSS
- Interest paid on housing credit
Nevertheless, in case of capital losses or losses arising from business ventures, you must file income tax returns within the due date, to carry forward the same successfully. However, losses arising from housing property can be carried forward without much implication.
Delayed Tax Refund
Typically, if you are entitled to receive a tax refund, you should file your income tax returns at the earliest. A delay in filing the ITR also stagnates the processing of tax refunds and may lead to a cash flow crisis.
In turn, it can give rise to an unwarranted shortage of working capital. Though businesses have the option to resort to funding options like invoice discounting services to release tied-up capital, filing ITR to claim refunds on time is definitely recommended.
The Implication Of Fraudulent Claims
As a taxpayer, you must also understand the impact of making fraudulent claims, when it comes to a tax deduction. Typically, when a taxpayer raises a fraudulent claim for tax exemption or deduction without having substantial documents to support the same, it is treated as tax concealment.