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July 31: a date that’s earned many of us the Late Lateef tag, a date we must keep with the taxman; the due date for filing income tax returns for most of us. It’s looming, just about a week away. If you haven’t filed it yet, get cracking.
Don’t push your luck — an extension of the last date to August 5, like last year, seems unlikely, if the tax department’s publicity blitzkrieg is any indication. So, be punctual and file your tax return by July 31. Miss the date and the taxman will make you pay. Here’s how.
Pay penalty
Delaying the filing of the tax return was always a bad idea. It gets worse from this year. Until last year, the taxman had the power to levy a penalty of ₹5,000 if you delayed filing the return beyond the assessment year (for instance, beyond March 2018 for the year ended March 2017). But this was a discretionary penalty — the assessing officer could choose to levy it or not.
But from this year (AY 2018-19), the taxman has no such discretion; he is obliged by tax law to levy a penalty for late filing of returns.
Section 234F introduced in the I-T Act last year and applicable from this year, imposes penalty of ₹5,000 for filing the return beyond the due date (after July 31) and ₹10,000 for filing after December 31. But in a relief to small taxpayers, the penalty for late filing will be ₹1,000 if the taxable income is ₹5 lakh or less.
Incur interest
A delayed tax return could mean extra interest outgo from your pocket.
If you owe money to the taxman, a late return will mean an interest payment of 1 per cent for each month of delay (part of a month is considered a full month for calculation).
Say, you owe the taxman ₹25,000 for the year-ended March 2018, and you file your tax return in November 2018 instead of by July 31.
While filing the return, along with ₹25,000, you will have to pay ₹1,000 as interest — at 1 per cent for four months (August to November).
This interest on delayed return filing is in addition to the interest on delayed tax payment for not settling the dues (through advance tax instalments) by March 2018.
If you file your tax return by the due date, you can escape the extra 1 per cent a month interest on delayed return filing.
Carry-forward curbs
Generally, losses are allowed to be carried forward and set off for up to eight years. But this benefit is allowed only if you file the return with the loss details by the due date.
You forfeit much of this benefit if the return is delayed. 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 an exception though. If the loss is from house property, the carry forward and set off leeway is available, even if the return is delayed.
Refund rigmarole
If you have paid excess tax and claim a refund, a delayed return will not only mean a delayed refund, but will also fetch you interest for a shorter period. In case of a late return, interest on your refund is calculated at 0.5 per cent for each month from the month in which the return is filed. But if a return is filed by the due date, the interest is calculated from the beginning of the assessment year (April).
Say you file this year’s return in December 2018 and claim a refund of ₹10,000. If the refund is paid in May 2019, you get interest on the refund only for six months (December 2018 to May 2019) due to the delayed filing. Had you filed the return on time before July 31, you would have got interest on your refund for 14 months (April 2014 to May 2015).
Prosecution possibility
The upper time limit to file your tax return is until the end of the assessment year. In the case of tax returns for FY 2017-18, you are allowed to file the return until end of the AY 2018-19 (up to March 2019). You could be prosecuted for not filing your tax returns by the statutory timelines (including extended periods), if you are supposed to.
Besides, the troubles with the tax department not filing the tax returns could close some doors for you. For instance, a tax return may be a must-have document when you apply for a loan or a visa to some foreign countries. So, go ahead and keep your date with the taxman.
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