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What is the penalty for late filing of tax return?

Puzzled about where, when and how much to answers. Find your queries answered here.

Question: I was not able to file my tax return by 31 July due to personal reasons. Can I file it now? Also, how is tax to be deducted if a person changes a job during the year?

-Ravi Kumar Singh, Chennai

Answer: There is no cause for worry if you have missed the 31 July deadline provided all tax dues have been paid. In case of salaried individuals, the tax arising from the income is usually deducted at source. If all heads of income have been taken into account and the tax paid, you can file your tax return even after 31 July without any penalty for late filing. But if you also missed the 15 March deadline of paying your taxes, you need to pay a simple interest of 1% on the balance per month. However, if there has been a change of job during the year, there may be a mismatch between what was due as tax and what was actually paid. Here is an example:

Job 1 (Apr-Aug)

Taxable monthly income: Rs 30,000

Total income April to August: Rs 1,50,000

Tax Deducted at Source: Rs 11,900
(Rs 2,380 per month after exemptions)

Total tax payable on the projected annual income of Rs 3.6 lakh came to Rs 28,560. The company deducted Rs 2,380 per month after taking into account Rs 1 lakh investments under Sec 80C.

Job 2 (Sep-Mar)

Taxable monthly income: Rs 40,000

Total income Sept to March: Rs 2,80,000

Tax Deducted at Source: Rs 11,200
(Rs 1,600 per month after exemptions)

Only income from September onwards taken into account. Total tax on Rs 2.8 lakh is Rs 11,200 so company deducted Rs 1,600 per month.

Total income: Rs 4,30,000

Tax payable:
Rs 49,980

Tax Deducted at Source: Rs 23,100 Balance due: Rs 26,880

In the above case, the new company gave the employee the minimum exemption and Section 80C benefits again while calculating his tax. The employee will now have to deposit the balance tax before 15 March to escape penalty. That is why it is always advisable to inform the company you are joining about the previous income. You also need to pay tax on income from other sources. These include the following:

  • Interest income from bonds, fixed deposits and savings bank deposits

  • Rental income from property

  •  Short-term capital gains from mutual funds and stocks

  •  Long-term capital gains from sale of assets

Till two years ago, up to Rs 12,000 of interest income in a year was exempt from tax under Section 80 L. But the removal of the section means that even interest earned on the balance in a savings account is liable to tax. Make sure you account for that in your tax return.

Some income is still tax free. This includes:

  • Dividends from companies and mutual funds

  • Interest earned on PPF and PF deposits

  • Income from life insurance policies

  • Capital gains made from switching or selling units of unit-linked insurance plans

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