In an effort to meet the revenue targets, the Income Tax (I-T) Department will be sending out letters to 230,00,00 assessees who have not filed returns. It has already issued letters to 245,00,00 individuals.

Therefore, if you haven’t filed taxes for the financial year 2012-13 (FY12-13), you still have time in hand. The I-T department accepts returns till the end of the assessment year, that is, till March 31, 2014. Importantly, if all your taxes are paid, you will not even be levied a penalty or get a notice for not filing returns for 2012-13 if you do so by March 31.

For financial year 2012-13, you can file belated return till March 31, 2014. However, if belated returns are not filed till March 2014 and there is no outstanding tax, you can be charged a penalty of Rs 5,000. But, if you have an outstanding tax liability, you will be levied an interest at 1% per month above the penalty.

There can be another chargeable interest component under Sections 234(B). It deals with delay in depositing advance tax and charges 1% interest per month starting April 1, 2013, till such time the outstanding amount is paid.

"Advance tax provisions are applicable only to those who have an outstanding advance tax liability of Rs 10,000 or more annually (under Section 234(B)). However, if such an individual has paid 90% of the outstanding tax liability then Section 234(B) is not applicable," says Vineet Agarwal, director at KPMG.

If the tax due is more than Rs 10,000, you pay an advance tax. Advance tax is payable in three tranches --- 30% is to be paid by September 15 of the relevant financial year, next 30% or 60% of the total liability by December 15 and remaining 30% or 100% of the outstanding by March 31.

Those who haven’t filed taxes for the FY 2011-12, can also file belated returns till March 31. There could be a penalty of Rs 5,000 for late filing depending on the assessing officer. Experts say penalty is invoked largely when there is an additional tax liability. The tax department considers genuine reasons for not filing returns, such as serious illness or injury.

Though the tax laws give a grace period for late returns, it also takes away some of your rights. For instance, you cannot revise your tax return if it has been filed after the due date (July 31). If you have filed by the due date, you can alter it any number of times before the end of the assessment year (March 31), or till the return is assessed. However, thereafter you are not allowed to change it. So if you miss out on any deduction or exemption, you can't claim it later.

“You also cannot carry forward any short-term or long-term losses if you have filed after the due date,” says Kuldip Kumar, executive director (tax & regulatory services) at PwC. Taxpayers, who have filed by the due date, can carry forward capital losses and adjust them against future capital gains. You can carry forward such losses up to eight financial years. So capital losses suffered in 2012-13 can be adjusted against gains till 2020-21 if you file returns on time.

Filing late returns also means you get tax refunds late. And if the refund is delayed, you also lose out on higher interest on refund. Explains Sudhir Kaushik of e-return intermediary TaxSpanner.com, that interest on late refunds for returns filed say by July 31, 2013 is calculated from April 1, 2013. However, if you file returns on March 31, 2014, the interest on late refund will be calculated from date of filing or March 31.