The ITR filing due date has been extended, but don’t wait till the 11th hour.
The taxman has shown magnanimity yet again. This time, he has extended the due date for filing income tax returns for the financial year 2018-19 (assessment year 2019-20) by a whole month — from July 31 to August 31. The extension this year is thanks to many factors including extension of due date for issue of Form 16 TDS certificates by employers to employees. Whatever the reason, this leeway of a month comes as a breather for many of us who are in the habit of pushing things to the last minute. That said, now don’t wait till August 31.
Spare some of your precious time to get your documents in place and file your tax return as soon as possible. Last minute dashes often result in crashes — that is, you could end up making some mistake in panic. Filling the tax forms, except ITR1, can be quite an obstacle course given the many details being asked for. Also, what if the 11th hour rush by many of our ilk causes the IT Department server to crash, leaving you stranded? So, it’s good to be early and punctual. In any case, don’t miss the August 31 deadline. That’s because not filing the tax return by the due date has adverse consequences.
One, from last year (AY 2018-19), the taxman is obliged by tax law to levy a penalty for late filing of returns. Earlier, he had the power to levy a discretionary penalty if you did not file the return until the end of the assessment year — that is, he could choose to let you off if he wanted to. Those good days are now history. Now, if you don’t file your return by the due date, Section 234F kicks in. So, the taxman will have to impose a penalty of ₹5,000 for filing the return beyond the due date (after August 31) and ₹10,000 for filing it 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.
Extra interest cost
Next, delayed return filing could cost you money in terms of extra interest payout. In case you have not paid your entire tax dues, you will have to pay not just the outstanding amount but also interest on this amount at the time of filing the delayed return. The interest rate is 1 per cent for each month of delay (part of a month is considered a full month for calculation).
So, if you still need to pay ₹50,000 as taxes for the year ended March 2019, and you file your return in December 2019 (instead of by August 31), you will have to pay ₹50,000 plus ₹2,000 as interest — at 1 per cent for four months (September to December).
Note that this interest on delayed return filing is in addition to the interest on delayed tax payment, if applicable, for not settling the dues (through advance tax instalments) by March 2019. If you file your tax return by the due date, this extra 1 per cent a month interest on delayed return filing can be avoided.
Generally, the benefit of carry-forward of losses and their set-off against incomes for up to eight years is allowed only if you file the return with the loss details by the due date.
If the return is delayed beyond the due date, you will lose this benefit and will not be able to carry forward and set off losses from business or capital gains. But in case of a loss from house property, the benefit is available even if the return is delayed.
In case you are entitled to a refund from the taxman due to payment of extra tax during the year, a delayed return will not just delay your refund, but will also fetch you interest for a shorter period.
In case of a belated 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 2019 and claim a refund of ₹10,000. If the refund is paid in May 2020, you get interest on the refund only for six months (December 2019 to May 2020) due to the delayed filing. Had you filed the return on time before August 31, you would have got interest on your refund for 14 months (April 2019 to May 2020).
Not filing tax returns on time could also close some doors for you. For instance, often, when you apply for a loan or a visa to travel to certain countries, tax returns are asked for. Without this key document, you will be at a disadvantage.
Finally, even if you miss the extended deadline, do file your return until the end of the assessment year — the upper time limit to do so. So, in the case of tax returns for FY2018-19, you are allowed to file the return until the end of AY 2019-20 (up to March 2020). If you are supposed to file returns but do not, you could be prosecuted.