The Modi government had introduced a strict timeline for filing Income Tax Return (ITR). First, the late filing of ITR beyond the end of an Assessment Year (AY) was disallowed. Later, a fine for delayed filing beyond the due date was introduced.

As a result, an assessee has to pay a fine up to Rs 5,000 for filing his/her return of income after the due date but before December 31 of an AY. The fine increases up to Rs 10,000 if an ITR is filed after December 31 till March 31 of an AY. Filing was disallowed beyond March 31 or the end of an AY.

While fines for late filings were introduced, the late filers were allowed to file revised returns, if needed.

However, if the tax payable is Rs 10,000 or above, a taxpayer need to pay interest at a monthly rate of 1 per cent on the outstanding tax payable starting from April of an AY till July of the year and from August to March of the AY, the rate of monthly interest becomes double to 2 per cent.

The interest on tax payable is irrespective of the due date of filing return and late fee for delayed filing of return.

The Union Budget 2022 has allowed late filing beyond the end of an AY. So, if an assessee fails to file his/her return of income within an AY, he/she will be able to file it in next two Assessment Years, but after paying heavy interest and fines.

If an assessee fails to file the return even within 12 months (in the first year after the end of the AY) from the end of the original AY, he/she may file it within the next 12 years (in the second year after the end of the AY) but only after paying an additional amount of 50 per cent on the total amount of outstanding tax payable and the amount of interest accumulated on it.

So, to avoid paying any interest and late fee, it’s better for you to pay the entire tax payable within a financial year as advance tax and file the return within the due date of filing return.