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Changes in income tax return filing process
February, 13th 2017

This government is focussing on early reporting of the income by the tax payers for facilitating the decision making.  And with this aim in mind has been proposing changes in the income tax law with respect to various aspects of filing of the income tax return. In good old days one was allowed to file income tax returns for previous two years.  The previous year’s budget has reduced this to one year. So beginning from 1st April 2017 you will be able to file your income tax return for one  year. For the previous year ended 31st March, 2017 you should be filing your income tax return by  31st March 2018. This year’s budget has proposed various changes keeping this aim of early reporting of income by the tax payers in mind. Let us discuss the provisions which are applicable to the Individual tax payers.

Mandatory payment of fee for delay in filing of your income tax return

Hitherto the Income Tax Act provided that in case you were required to file  your income tax return under Section 139(1) and failed to file the same before end of the assessment year, the income tax officer could levy a penalty of Rs. 5,000 for such failure after giving you adequate notice to explain your case.  With amendment of law from the last year’s budget you cannot file your income tax return beyond the end of the assessment year, the penalty provisions became redundant. Moreover the levying of penalty was not automatic and in my experience of 35 years I have not come across even a single case where such penalty was levied.  

So in order to ensure that the tax payers file their income tax returns by the due date which is generally 31st July for the average tax payers, this year’s budget has proposed to levy a mandatory fee for such delay in filing of your income tax returns beyond the due dates. The finance minister has proposed to levy a mandatory fee in case you are required to file your income tax return under Section 139(1) due to the income being more than  the taxable limit before allowing deductions under Chapter VIA and capital gains exemption under Section 10(38) of the income tax act. 

The amount of fee would depend on the quantum of delay and quantum of your income. In case your income exceeds Rs. 5 lakh in a year you will have to pay a fee of Rs. 5000 if you file your income tax return beyond 31st July but by 31st December of the assessment year. For filing the return of income beyond 31st December but by 31st March you will have to pay a fee of Rs. 10,000. The amount of fee, however, would be restricted to Rs. 1,000 in case your taxable income did not exceed Rs. 5 lakh for the year. 

This mandatory fee has to be paid as self assessment before filing of the income tax return without having to wait for any communication from the assessing officer.  

It may be interesting to note that the fee is not payable in case your income does not exceed the basic exemption limit before giving the effect of deduction and exemption as explained above as you are not required to file the return of income but are allowed to file the same.  This will result into additional revenue for the government in the form of fee instead of penalty which did not bring any substantial revenue for the government.  

Time limit for revisions of the income tax return filed by you    

Prior to the amendment of Section 139 by the Finance Act 2016, you were not allowed to revise your income tax return in case any mistake or error is noticed later on unless the same was filed before the due date applicable in your case. So you could revise income tax return even if you had filed your original return by the due date, within a period of one year from the end of the assessment year or completion of the assessment whichever is earlier.  The finance minister has proposed to curtail the time limit available with you for revising the income tax return by one year and now you are allowed to file your revised return by the end of the year only. So practically the time limit for filing and revising your original return remains the same. This will apply for the income tax returns to be filed for the assessment year 2018-2019. So for example you file your original return for the assessment year 2018-2019 on 31st March 2019 so you cannot revise the same beyond 31st March 2019 itself.

These changes proposed will bring the reporting of the income closer to the end of the year than what was happening earlier and will also result into better and timely 
compliance by the tax payers.

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