Better Late Than Never

     Print Edition: September 2011

File I-T returns on time to save trouble
Missing the deadline for filing income tax returns can be rectified by filing a late return. As long as you do not have tax losses to be carried forward or tax that is still payable, it is possible to avoid negative consequences as well. Pramod Achuthan, Tax Partner, Ernst & Young, discusses the various aspects of filing late returns.

The return of income can be filed within a period of two years from the end of the financial year concerned (the belated return for financial year ended 31 March 2011 can be filed by 31 March 2013). After that it becomes time-barred, that is, cannot be filed.

There is a discretionary penalty of Rs 5,000 if the return is not filed within a year from the end of the tax year. For example, there will be no penalty if the return of income for tax year ended 31 March 2011 is filed by 31 March 2012. If it is filed after that, the tax officer can levy this penalty.

If the tax has not been paid before the end of the tax year concerned and you file the return late, incremental interest at the rate of 1% per month will be payable on the unpaid amount after the due date. This is in addition to the 1% per month interest for non-payment of advance tax, that is, tax due after tax deduction at source exceeding Rs 10,000. Thus, late returns can result in an additional interest burden.

How to e-file income tax returns

Also, where self-assessment taxes are paid before the original due date, there is a debate whether the incremental 1% interest is payable as above. While the literal language supports this, certain arguments support the view that no interest should be levied.

In addition to the above, one of the major negative consequences of not filing the return in time is inability to carry forward business or capital losses for set off against future profits and gains. In order to carry forward such losses, it is mandatory to file the return in time.

However, the loss from house property does not have this limitation and can be carried forward even if the return is filed late. Further, certain deposits to reduce the capital gains liability are generally required to be made before the due date.

A late return cannot be revised, unlike a return filed within the original time limit, which can be revised within a specified period. What this means is that once a person has missed the original deadline, he needs to be extra careful, as a late return cannot be revised.

Apart from the technical points mentioned above, a return of income is at times essential while applying for bank loans, visas, etc. Further, late filing can delay processing for tax refunds.

These days, it is possible to verify the tax deducted from your income online once you create your login on the website of the income tax department. Form 26AS, providing details of tax accumulated against your PAN, can also be downloaded for verification. In case you come across any discrepancy, you should approach the person who has deducted the tax.

Now file I-T returns from your mobile

But one should not wait until the last moment. There is a possibility that certain material aspects may get skipped due to the last-hour rush. In case you are filing returns online, a technical error or failure may also crop up.

Hence, once the tax year is over, it is always better to start collating documents and ascertain whether any tax is still payable or any loss is to be carried forward. In any case, it is better to file the return at the earliest.

Pramod Achuthan, Tax Partner, Ernst & Young
Gouri Shintre, Senior Tax Professional, Ernst & Young, also contributed to the article

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