IT Dept: Penalty for Late Filing Income Tax Return

As per the announcement, the last date of income tax return filing for FY 2018-19 has been extended till 31st August 2019. Those who fail to submit their tax returns by the due date will have to pay a hefty penalty as decided by the Income Tax Department.

The delay in paying tax returns from your side can attract a penalty up to INR 10,000 as per the amended rules of Section 234F, which came into effect from 1st April 2017.  As a taxpayer, if you fail to pay your returns on time, you also have to pay interest on the unpaid tax amount. The interest charged on the outstanding amount will increase with the delayed tax period. A particular taxpayer, failing to furnish his/her returns also losses some other tax perks & benefits, given by the tax department.

These new changes have been proposed by the income tax department and should be abides by all the taxpayers by filing their tax dues on time to avoid any penalty and interest charges. Various Types of Income Tax Returns Filed Under Section 139 of the Income Tax Act 1961.

The late filing of tax returns by separate tax-paying entities is handled under various subsections of Section 139 of the Income Tax Act. Section 139 also provide guidelines or details regarding the late filing of tax returns, if a particular individual or entity fails to file their original returns within the given time period. The key subsections of Section 139 related to ITR, which deals with the individual taxpayers are given below:

Section 139 (1): Mandatory and voluntary returns

As per section 139(1), return filing is mandatory for the below-given individuals.

• Any particular person, having a total income that exceeds the tax exemption limit should file an Income Tax Return on or before the given due date.
• Any resident, having an asset located outside of India ( even financial interest in some entity) should file his/her tax returns on the due date
• Any resident who holds the signing authority for a foreign account should mandatorily file a tax return, even if the income falls below the exemption limit.

Read Also: List of Top 5 Income Tax Return Filing Software - Free Download

Income tax filed by individuals who do not fall under the given tax bracket of the Indian government is counted as voluntary returns. Voluntary returns are also considered as valid returns under Income Tax laws.

Section 139(4) – Late Income Tax Return

If a particular taxpayer fails to furnish his/her returns by the due date given under section 139(1), he/she is allowed to file belated returns within one year starting from the assessment year or before the completion of the assessment, whichever falls earlier as per Section 144.  Although, such taxpayers might have to pay a penalty of INR 5,000 as disclosed under Section 271F of the Income Tax Act, 1961.

Section 139(5) – Revised Return

In case, where you found a mistake or error in your ITR after you filed it, you have the facility to submit a revised return till the completion of the relevant assessment year.

For instance, once a particular taxpayer filed his ITR for FY 2018-19, he/she can file a revised return till the end of the given assessment year, i.e., 31st March 2020. Earlier the taxpayers have two year time period to file their revised ITR, i.e., one year post the expiry of the relevant assessment year.

A revised return form can be used to file a revised return under section 139(5). The taxpayers must also select the option '17 - Revised u/s 139(5)' in the 'return filed under' column of the revised return form. Once an amended return is filed under Section 139(5), this return becomes valid, and the previous return becomes null void.

Section 139(3)-  Filing ITR in case of Loss

Section 139 (3) of the Income Tax Act governs the filing of tax returns that were made by taxpayers in case of loss. In case a particular taxpayer has faced a financial loss during the previous fiscal year, it is not mandatory for him to file his/her tax returns for that specific year.

Although there are specific provisions that must be kept in mind by the taxpayers:

If the loss is incurred under the income category of 'Capital Gains' or 'Profits and Gains of Business and Profession,' then filing tax returns by the due date is mandatory for a taxpayer when he/she chooses to carry forward that loss & offset it with future income.

In cases where the loss is incurred under the house property section, the taxpayers are allowed to carry forward that loss even in circumstances when they fail to file their income tax returns by the due date. In case, when a loss is encountered under other income section during the same year, it is allowed to be set off by the tax authorities, even if returns are not filed by the due date.

Point to Remember

One must note that the losses of the current year are not allowed to be carried forward as per Income Tax laws, barring the condition when the return of the loss is furnished before the due date. Although, one can carry forward the losses of the previous years if the return for that loss was submitted by the due date & such loss was processed.

Section 139(4a) – ITR Filing against Income earned from Charitable & Religious Trust

In case of income earned from the religious trust or public charity, claiming exemptions under Section 11 and Section 12 of the Income Tax Act, the tax return must be filed mandatorily as a private citizen in circumstances when the total income earned before the provisions of Section 11 and Section 12 exceeds the basic tax exemption limit.

Section 139(9) – Defective Returns

As per the guidelines of Section 139(9), the ITR filed without the presence of certain key documents is counted as a defective return.  There are scenarios when the tax return filed by you can be counted as defective. For example:

1. Leaving some mandatory fields blank in the form while filing your tax returns is also considered as a defective return form. 
2. The non-submission of proof of claim against paid taxes (whether it was paid as advance tax, self-assessment tax or TDS).

In case, when an ITR is counted as a defective return by the assessment officer, the relevant taxpayer in question is informed and is also given a chance to rectify his mistake in the filed ITR within 15 days post intimation.  This particular message is delivered to a taxpayer through a letter. This given period of 15 days can also be extended if requested through the application by the taxpayer.

Penalty of Late filing of ITR

Here are certain disadvantages of missing the due date of Income Tax Return filing As per section 234F, the taxpayers might have to pay a penalty of

• Up to INR 5,000, If Income Tax return is filed post-deadline but before 31st December
• Up to INR 10,000, If Income Tax return is filed post-deadline but on or after 1st January

In case, the taxpayer's total income is up to INR 5 lakh; the total penalty amount will be subject to a maximum of INR 1,000, a decision taken by the tax department to offer relief to the small taxpayers.

Carry forward losses from 'Capital Gains' or the 'Profits and Gains of Business/Profession' facility is taken away from you, in case you are late in filing your taxes. Losses faced in income earned from house property is an exceptional case here.  You also have to pay interest on unpaid tax in case of missing the ITR filing due date. Further, if you stand eligible to claim a refund and interest on that refund amount, you will not receive the same, if you fail to file your tax returns on time.

Interest on Late Filing of Income Tax Return

• The taxpayers also have to pay interest on the outstanding tax amount along with the penalty for late ITR filing.
• As per Section 23 4A, in case of late filing of ITR, interest on the tax amount outstanding is charged at 1 percent rate per month or part of the month of simple interest.
• The interest calculation starts from the due date for tax filing to the date when you actually file your return for the given financial year.
• For example, suppose the tax filing due date is 31st August for a particular fiscal year, but you file your tax dues by 20th December. In such a scenario, you have to interest for four months. 
• The total interest payable for that period would be INR 4000 (supposing the total tax outstanding is INR 1,00,000 and interest is 1 percent for four months).

FAQs on Income Tax Return

Q 1. When I have to pay an interest penalty on my delayed returns?

In case you miss ITR filing due date, you have to pay the penalty on your outstanding taxes if any. Although, interest on your unpaid taxes only gets applied when you have some tax amount outstanding. You can also file Income Tax Return via Gen IT Software and avoid any penalty.

Q 2. Am I eligible to carry forward losses if I do not file my returns on time?

According to tax laws, carrying forward losses facility for losses incurred under any head of income (except income from house property) is only allowed, when you file your returns on the due date.

Otherwise carrying forward of losses is not allowed. For loss incurred under the head' income from house property' can be carried forward by you, even if you fail to file income tax returns on time.

Q 3. Under what circumstances filing returns on time in mandatory?

You as a taxpayer should always file your ITR by the due date in case your total income exceeds the tax exemption limit. Filing your Income Tax returns on time becomes very important if you are expecting a huge refund, need to carry forward your losses or have to deposit balance tax,