Filing of Income Tax Returns-Importance of Due Date

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Filing of Income Tax Returns-Importance of Due Date

 

 

Before continuing the series of articles on Estate & Succession planning, let us take a break to look at the most important deadline of 31st July which is the due date for filing income tax return for the majority of the taxpayers. The most common question is what if the return is not filed within the due date? It may be noted that return can be filed belatedly even after 31st July (i.e., belated return) till 31st December whereas Updated Return can be filed within 2 years from the end of the relevant assessment year. Belated or late filings of ITR have costs & consequences not only in terms of monetary penalty & fine but also in terms of denial of various benefits & incentives.  Let us know about it.

Duty to file Income Tax Return:
Under the Income Tax Act-1961, every person whose income exceeds the Basic Exemption Limit (BEL) is mandatorily required to file the ITR. The obligation to file ITR is linked with income & not with final tax liability. Most common error is committed by the salaried taxpayers who are not filing their ITR on the pretext that the TDS is done by their employer & it absolves them from their liability to file the ITR. This is not so. Even if the tax is fully paid or even if the final tax liability of the taxpayer is less than the amount of Tax Deduction at Source (TDS), still such a person is required to file the return of income. Be cautious about the legal provision & file the ITR even if no more tax is payable at the time of filing.  Similarly, Companies & firms have to file the return of income even if there was no business during the year or they have no tax liability or even if the firm or company is incorporated on the last day of the financial year.

Further, the liability to file the ITR arises if the income before claiming deduction under Chapter VIA (which includes deduction u/s 80C towards LIC/PPF/NSC/ELSS etc, U/s 80D towards mediclaim payment, U/s 80CCD(1B) towards NPS) etc exceeds the BEL. Any person having any beneficial ownership or any assets or signing authority in any account located outside India are mandatorily required to file ITR irrespective of BEL. Even though the return filing is possible after the due date with some late fee, still it is advisable to file it within the due date. There are various advantages if the return of income or audit report thereto is filed within due date, as under:

  1. No Late Fee:
    a) If the return is not filed within the due date then late fee of Rs. 5,000/- would be applicable. However, if the total income doesn’t exceed Rs. 5 Lakh then the late fee of Rs. 1,000/- would be applicable & not Rs. 5,000/-.
    b) The question often asked is whether late fees would be applicable in case the nil tax return is filed? It may be noted that the late fee is applicable only if there is an obligation to file the return of income u/s 139(1). Returns filed voluntarily without any obligations attached u/s 139(1) would not be subject to any late fee. At the cost of repetition, firms/companies without any income/business would be liable for late fees if ITR is not filed within the due date as the obligation is imposed by section 139(1).
    c) Taxpayers must note that now ITR cannot be filed after 31st December as the belated returns are permitted to be filed till December only. [Earlier, the option to file the belated income tax return was there till 31st March]. Only option after December could be to file an “Updated Return” which will carry additional tax impact.
  2. Advantage of Loss Carry forward of Loss:
    If taxpayers have incurred a loss during any year, they are allowed to carry forward such loss for set off against subsequent years income. However, this benefit of loss carry forward is available only if ITR is filed within the due date. If the ITR is filed after the due date then the benefit to carry forward the loss is lost.
  3. Interest U/s 234A:
    Any delay in filing of the ITR, beyond the due date, attracts an additional interest at the rate of 1% for every month, or part of a month during the period of delay on the amount of tax remaining unpaid. So, by filing income tax returns a person can avoid interest liability as well.
  4. Penalty for Late filing of Audit Report:
    The taxpayers who are required to get the books of accounts audited u/s 44AB are also required to file an audit report one month before the due date of filing ITR. Now, the due date of filing ITR in audit cases is 31st October which means that the due date of uploading the audit report would be 30th September. If such a taxpayer fails to file the audit report by 30th September then they may be liable to penalty @ ½% of the turnover. However, the maximum amount of penalty in such cases is restricted to Rs. 1.50 Lakh.
  5. Benefit of application of money in case of charitable Trust:
    The benefit of application of income to the charitable trust is available only if  the income tax return, audit report in Form No. 10B, other declarations regarding accumulation etc. are furnished within a prescribed time period. Delay in filing will result in denial of the benefit of application of income and may result in hefty tax liability. The due date for filing the return by Charitable Trust is 31st October and not 31st July.
  6.  Few Deduction only if the return is filed within Due Date:
    There are various deductions like deduction u/s 80HH to sections 80RRB, u/s 80IA, IB, IC, etc which can be availed only if the return of income is filed within the due date. Belated filing of return results in denial of such deductions. It may be noted that most of the societies are not liable to pay the tax on their income as they are eligible for deduction u/s 80P. Such societies are also required to file their return within the due date failing which no deduction u/s 80P would be admissible. In short, few tax benefits are available not on mere compliance but on timely compliance.
  7. Income Tax Refund:
    It’s only after filing of the ITR that the return can be processed. By filing income tax returns earlier, taxpayers can get income tax refunds sooner if there is an excess TDS/TCS.

Conclusion:

Though the taxpayers can file a belated or updated return, still it is advisable to limit the filing within the due date. Filing the income tax return within the due date is always advisable & advantageous. Starting early is the mantra for avoiding not only the error and omission in the income tax return but also in filing it belatedly.

[Readers may forward their feedback & queries at taxtalknew@gmail.com. Other articles & response to queries are available at www.theTAXtalk.com ]

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Regards,
CA Naresh Jakhotia
Partner – M/s. SSRPN & Co.
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