Jigar M. Patel
International Tax Attorney
With just a week away from the deadline of 31st July for filing Income Tax Returns (ITRs) for Assessment Year 2023-24, taxpayers need to be sensitized of the consequences of belated ITRs. The complacency in the mind of a taxpayer for delaying filing of his ITR is triggered by the notion that if no tax is due on returned income or he is entitled to refund, there would be no consequences of interest or penalty.
Late Fee for Delay in ITR Filing
Where a taxpayer is required to file his ITR under the provisions of Section 139, delay in filing the same attracts a late fee as prescribed under Section 234F of the Income-tax Act. Such fee is attracted even for delay of a single day or even where the taxpayer is entitled to a refund. The prescribed late fee is Rs. 5,000. Where returned income is less than Rs. 5 lakhs, it is Rs. 1,000. After July 31, an ITR cannot be uploaded without including this fee.
No Benefit of Concessional Tax Rates under New Scheme
In case of an ITR which is not filed by the due date prescribed under Section 139(1), there is another big trap for which every taxpayer seeking to opt for concessional tax rates under the New Scheme under Section 115BAC should be extremely cautious of. The dire consequence of delay can be best appreciated from the case study below:
Case Study: Mehra’s total income for Assessment Year 2023-24 is Rs. 20 lakhs. He has planned to opt for the New Scheme, on which the tax payable is Rs. 3,51,000. If he misses his ITR due date, he would lose his valuable option to opt for the New Scheme with concessional tax rates. Per force, he would be required to file his ITR as per the tax rates of the Old Scheme, wherein, the tax payable on the same income of Rs. 20 lakhs works out to Rs. 4,29,000. This additional tax burden of Rs. 78,000 for a marginal miss would literally prove to be Mehra’s nightmare.
No Benefit of Carry Forward of Loss
In case of taxpayers entitled to carry forward any losses under the head ‘Capital Gains’ or ‘Profits and Gains from Business or Profession,’ Section 80 provides that where the ITR has not been filed within the time limit prescribed under Section 139, no carry forward and set off of such loss shall be eligible against any gains in the subsequent years.
Sacrifice of Interest on Refund
A delayed ITR would also result in the taxpayer being deprived of proportionate interest on refund due to a taxpayer as per the provisions of Section 244A. Where a return has been filed in time, interest at the rate of 0.5% per month (6% per annum) payable to the taxpayer is computed from the first day of the assessment year (being 1st April) to the actual date of grant of refund. However, in case of a belated ITR, the period from 1st April to the date of the filing of the belated ITR would be excluded.
So, get set and go to ensure that you do not miss the D-Day 31st July!
