Amid much speculation, the government did not extend the deadline for filing income tax returns for individuals for the assessment year 2023-24.
Technically, you can still file your return before December 31, 2023, but missing the due date of July 31, 2023 can lead to unfavourable consequences, including fines and penalties, among others.
Here are the potential implications of late filing your income tax return.
Penalty: In case an individual fails to file their income tax return (ITR) for AY 2023-24 by the due date of July 31, 2023, they still have the option to file a belated return by December 31, 2023.
However, filing a belated return may attract a penalty of Rs 5,000. Moreover, Under Section 234A of the Income-tax Act, 1961, there will be an additional interest charge of one per cent per month or part thereof on the taxes due until payment.
To avoid further penalties and stay compliant with tax regulations, it is crucial to promptly file the belated return. It’s essential to be aware that the interest calculation starts the day after the due date.
Inability To Offset Losses: If losses are incurred (excluding house property loss), they cannot be carried forward for set-off against income in future years unless the return is filed within the due date. This means that failure to meet the deadline will result in the loss of this opportunity to set off losses against future gains.
However, it’s important to note that losses under house property can still be carried forward for set-off. Failure to utilise these losses against future income may lead to missed tax deductions, potentially resulting in higher tax payments than necessary.
Says Archit Gupta, founder and CEO, Clear, a tax portal: “In case you have incurred losses from sources like the stock market, mutual funds, properties, or any of your businesses, you have the option to carry them forward and set them off against your income in the subsequent year. This provision substantially reduces your tax liability in future years. However, you will not be allowed to carry forward these losses if you miss filing your ITR before the deadline.”
Interest In Late Filing Of Return: If you submit your return after the deadline, you will be liable to pay interest at a rate of one per cent per month or part month on the unpaid tax amount under Section 234A of the Income-tax Act, 1961.
Refunds Delayed By Late Filing: To receive your refund for the excess taxes paid as quickly as possible, it is essential to file your returns before the due date. Delayed filing may result in a delay in receiving your entitled refund.
Prosecution: In the event of a wilful failure to file a return despite receiving notices, the income tax officer has the authority to commence prosecution proceedings. This could lead to imprisonment for a period ranging from three months to two years, coupled with a fine.
In addition, if the owed tax amount to the income tax department is substantial, the prosecution period may be extended to up to seven years.
ADDITIONAL CONSEQUENCES OF MISSING DEADLINE
While not directly governed by income tax rules, late filing of tax returns can have various other repercussions.
Banks and financial institutions often rely on these tax documents to assess your financial status and loan repayment capacity. Failure to file your income tax return on time may hinder your ability to apply for loans, thus impacting your chances of securing financial assistance.
Also, for international travel, tax returns become essential, as many countries require applicants to submit copies of previous years’ tax returns at the embassies, consulates and high commissions when applying for visas. Failure in filing tax returns promptly could lead to complications in obtaining a visa for your next international trip.
In light of these considerations, filing tax returns on time is a prudent and wise decision to avoid potential obstacles in financial matters and travel arrangements.