The deadline for individual income taxpayers who are not subject to audit is 31st July. Failing to meet this deadline can have a set of unfavourable consequences. In this article, we take you through them.
Before we go through them, it is important to explain that the 31st July deadline applies to income received in the preceding financial year. For instance, 31st July 2018 is the filing deadline for the financial year running from 1st April 2017 to 31st March 2018. For earlier financial years, there was a provision for filing ‘belated returns.’ However this deadline expired on 31st March 2018. The belated return provision is still available for the financial year 2017-18 and the last date for this type of return is 31st March 2019. However delaying the return until that date can give rise to penalties and other unfavourable consequences.
If the return is filed after 31st July 2018 but before 31st December 2018, a penalty of Rs 5,000 becomes payable. If the return is filed after 31st December 2018 but before 31st March 2019, a penalty of Rs 10,000 becomes payable. However, if your income is below Rs 5 lakh, the fee becomes limited to Rs 1,000.
Interest gets added
Apart from missing the return deadline, if you also have unpaid tax, you will be charged interest at 1% per month on the amount of unpaid tax. This is simple interest, not compound interest. For instance, if you have a tax liability of Rs 1 lakh, a sum of Rs 1,000 per month in interest will get added until you pay the tax. For instance, if you pay the tax six months late, you will have to pay Rs 5,000 over and above the Rs 1 lakh that is due.
Note that although you can pay the entire tax due without filing the return, you cannot file a return without paying the tax due.
You cannot carry forward losses in a belated return except losses from house property. For instance, long term/ short term capital losses on shares and mutual funds cannot be carried forward.
Refund gets delayed
You cannot claim a refund until you have filed returns. In addition, interest on the refund will not be paid by the government for the period of your delay in filing returns.
If you are found guilty of ‘wilful failure’ to file returns within the due time, you can be sentenced to imprisonment under Section 276 CC of the Income Tax Act, 1961. This is three months (min) – two years (max) if the tax due is less than Rs 25 lakh and six months (min) – seven years (max) if the tax due is more than Rs 25 lakh. This provision is only used in exceptional circumstances but can get attracted if you miss the deadline.