Personal Finance

Hurry up to meet the tax deadline

Anand Kalyanaraman | Updated on January 17, 2018

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Filing on time will let you revise the return, carry forward losses and save on interest

There are just 7 days now to the due date (July 31) for filing your tax return. If you haven’t done this yet, get going pronto. Missing the deadline can cost you. Here’s how.

Pay more

If you have pending tax dues, a belated return means higher interest cost. You have to pay 1 per cent of the amount for each month of delay.

This is in addition to the interest for not settling the dues by March 31 through advance tax instalments (if applicable). Say, your pending tax liability for the year ended March 2016 is ₹30,000 and you plan to pay this along with your delayed tax return in November 2016.

Besides the dues and the interest for not paying them by March 31, you will have to shell out ₹1,200 — that’s 1 per cent each month on ₹30,000 for the four months delay in return filing (August to November).

It doesn’t matter if you file the return on November 1 or November 30. A part of a month, a day even, is considered a whole month for interest calculation on delayed filing.

If you file the return by July 31, the due date, you save this extra interest cost. Also, it makes sense to quickly pay off your dues even if the tax return filing is delayed. That’s because the interest meter stops ticking when there are no dues. Says Neha Malhotra, Executive Director – Taxation at Nangia & Co, Chartered Accountants, “Where due to non-availability of time, the tax return is not filed within the due date, the due taxes should be paid on time to ensure that interest implications come to a halt. Interest for delay in filing of return is payable only on the tax due at the time of filing return.”

No scope to change

If you file a belated return, make sure it is accurate. That’s because you are not allowed to revise a belated return.

If by mistake, you have not claimed some deduction or have declared excess income in your delayed return, tough luck. You cannot correct the error. So, your tax outgo will be higher than what you would have paid.

Likewise, if by oversight you declared less income or claimed a deduction you were not entitled too, you would have paid less tax than actually due.

You cannot correct this , if you filed the return late and the taxman could send you a demand notice later, with penalty and interest claims. If you file the original return by the due date, you can file revised returns.

Carry forward curbs

Generally, losses are allowed to be carried forward and set off for up to eight years. But only if you file the return with the loss details by the due date.

You forfeit much of this right if the return is belated. So, you will not be able to carry forward and set off losses from business or capital gains if you miss the return filing deadline.

There is just one exception. If the loss is from house property, the carry forward and set off leeway is available, even if the return is delayed.

Delayed refunds

A belated return can push back your refund claim settlement if you have paid excess tax during the year. The refund may come but will take time. Also, the interest paid on the refund (0.5 per cent a month) will be only from the month in which the return was filed.

If you file the return by the due date, not only will the refund processing be quicker but you will also be entitled to interest from the start of the assessment year — that is, from April 2016 for the year ended March 2016.

Incidental troubles

Without a tax return, you could find it tough to get your loan application sanctioned or your visa request to a foreign country approved. It’s best to keep this handy document ready.

Sure, the taxman allows belated returns — you can file it up to one year from the end of the relevant assessment year.

For the year ending March 2016, the assessment year closes in March 2017 and you can file the tax return up to March 2018.

But if you delay filing beyond the close of the assessment year (March 2017), the taxman can charge a penalty of ₹5,000; he can choose to waive it off as it is a discretionary power. Why take the risk though?

Also, the recent Budget has cut the timeline for filing belated tax returns. So, next year (ending March 2017) onwards, you can file the returns only till the end of the assessment year; the one year grace period has been done away with.

You could be prosecuted for not filing your tax returns by the statutory timelines (including extended periods), if you are supposed to.

Be on the right side of the law and file by the due date.

Published on July 23, 2016

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