The Government of India requires Income Tax returns to be filed by every PAN bearing individual or Organization after each financial year ending. The year in which the income tax is evaluated is called as the Assessment Year. Different due dates depending upon the type of Individual or Organization have been set by the IT department. Delay in filing IT returns attracts Interest penalty and also fines. It is highly advisable to file the Income Tax returns in time to avoid any legal action by the IT department. In today’s world where every transaction is linked to the PAN card through your bank account, it is highly risky to delay filing of IT returns and may attract notices from the IT department and increase hassles. Let us take a look at the disadvantages of not filing the Income Tax Return or filing it after the ‘due date:
- No revision of return filed: Section 139(5) of the Income Tax act states that no return filed after its respective due date can be given a chance of revision. If the assessee later finds out that there was a mistake in calculation of the Income Tax the same cannot be rectified or revised under this act. Any losses or penalty which may occur due to incorrect returns filing is then levied upon the assessee and is payable by the same.
- Losses cannot be carried forward: This is one of the most important disadvantages of not filing the Income tax return within the due date. Any operational losses or initial business stage losses cannot be carried forward. This means that if in the initial years you invest in your business and generate losses then you cannot claim those losses in the following years when you make profits out of those investments or expenses. You are charged income tax on the profits without considering the previous year’s losses.
- Interest payable on delay: As per the Income Tax act wherever there is income tax payable in delayed returns an interest of 1% per month is payable on the delayed income tax. To add to this the income tax department may even initiate prosecution if the return is not filed in the respective assessment year and the amount of income tax payable exceeds Rs. 3,000/-.
- Penalty & Fines: Even if there is no tax payable and yet you fail to file the income tax returns till the end of the Assessment year the Income Tax department can levy a fine of Rs. 5,000/- for not submission of returns.
- Interest lost in case of refunds: In case there is a refund due to TDS already paid by the assessee it is only paid after the date of filing the returns. Hence the time for which the return is delayed after the due date is not paid for.
This is applicable for all types of Organizations and Individuals. The due date for filing the returns every year is 31st of July. Even if you have not been able to file the returns in the due date, there are still provisions that extend the due date. Never the less, penalties are attracted if the due date is missed.