Unlike life, the tax department is willing to give you a second chance. Even if you forget or are unable to file your return of income for a year, the department allows you to file a ‘belated return’. Of course, there’s a cost attached to this, so you pay for your laidback ways, but at least you can file.
A belated return can be filed within a period of one year from the end of the assessment year in which the original return is due for filing. You can, therefore, still file a valid tax return for the income earned during the financial year ended March 2007—but the return would be treated as “belated”.
The option of belated filing is given to provide another window of opportunity to those who have not been able to file the return of income on time for any reason. However, a voluntary filing of return of income, even belated, would help you ward off penal consequences that may apply to non-disclosure of income. The interest and penal consequences for late filing would still apply, though.
So, what does it cost you to file late? A delayed tax filing would cost you interest at the rate of 1% per month on the outstanding tax liability for each month of delay in filing. The interest for late filing is over and above the interest liability that you incur for not having paid sufficient taxes in advance. Yes, it’s a double whammy, but there’s worse in store. Apart from the interest levied, a return delayed beyond the assessment year also attracts a penalty of Rs 5,000.
The good news is that if tax has been deducted at source, there’s no interest liability. Protection from interest levy would also apply if you have paid all your taxes in advance. It gets a little tricky though if you have not paid your taxes within the tax year but have deposited the same before the original filing deadline. While the courts take a sympathetic view and have ruled that late filing interest would not apply to such cases, it’s best to ensure that the taxes are paid in advance.
Now, what happens if you don’t have to pay any interest and have only losses to return? The taxman has ensured that you have worries of a different kind. A belated return does not entitle you to carry forward your losses to be set off in a subsequent year.
So, if you are a businessman or a punter, all your business or speculative losses have well and truly gone down the drain and there is not even a “set-off” salvage available in a later year. Ditto for capital losses. Not all losses are really lost though; a belated filing does not impact the carrying forward of house property losses and depreciation allowances.
Finally, if you are filing a belated return, you’d better get it right. This is the message from a decision of the Supreme Court, which ruled that late filers don’t have the option of “revising” their return to amend any mistakes. This right is available only to those taxpayers who filed returns on time.
Amitkumar Bherwani is a senior tax professional with Ernst & Young.
