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No penalty on late filing of ITR if your income doesn't cross this limit
July, 26th 2018

You have less than a week left to file your income tax return (ITR). This year it becomes all the more important to file your return on time as you will be liable to pay a late fee for filing your ITR after the deadline of July 31, 2018 (unless the government extends it).

The penalty you will have to pay
From this year, a taxpayer is liable to pay late ITR filing fees of:
a) Rs 5,000 if tax return is filed after the deadline but on or before December 31 of the relevant assessment year (in this case December 31, 2018).

b) Rs 10,000 if tax return is filed after December 31 but before the end the relevant assessment year, i.e., before March 31 (in this case between 1 January 2019 and March 31, 2019).

If you are a small taxpayer whose gross total income does not exceed Rs 5 lakh then the maximum fees you are liable to pay is Rs 1,000. This law of levying late filing fees under section 234F was introduced in the Budget 2017 and became effective for financial year 2017-18 or assessment year 2018-19 onward. Assessment year is the year immediately following the financial year for which the ITR is filed. The assessment year for the financial year 2017-18 is 2018-19.

Who will not have to pay?
However, chartered accountants are of a view that if a person whose gross total income does not exceed the basic exemption limit files a belated return, he/she will not be liable to pay penalty.

"There will be no late filing fees to be levied as mentioned under section 234F of the income tax return filed after the deadline if the gross total income does not exceed the basic exemption limit," says Abhishek Soni, CEO,, a tax return filing company.

Clarifying further, Shalini Jain, Tax Partner, People Advisory Services, EY India says, "Section 234F draws reference of persons liable to pay late filing fees for filing belated income tax return from Section 139 of the Income-tax Act. Section 139(1) of the Act states that the following persons have to mandatorily file ITR: (a) a company or a firm/LLP irrespective of quantum of income and (b) any other person only if his total income exceeds the maximum amount not chargeable to tax, i.e., basic exemption limit."

"Gross total income as mentioned in section 139(1) refers to the total income before taking into account the tax exemptions available on the incomes specified under section 10(38) and deductions under section 80C to 80U of the I-T Act," explains Chetan Chandak, Head of Tax Research, H&R Block, India.

This can be explained with the example of a resident individual aged less than 60 years. Suppose in a particular financial year you earned interest income of Rs 1.5 lakh and long-term capital gains (LTCG) from equity shares of Rs 1.5 lakh. Remember gains made on sale of equity shares and equity oriented mutual fund after holding them for more than 12 months are tax exempt for FY 2017-18. Here, the total income will be taken as Rs 3 lakh and you will be liable to pay penalty as mentioned under section 234F if you file a belated return.

However, there is a catch. If you are an ordinarily resident individual with income from foreign assets and your taxable income is below the threshold, then you will have to pay the penalty if you don't file ITR before the deadline. "As per fourth proviso to Section 139(1), if you are a resident individual (other than not ordinarily resident within the meaning of Section 6(6) of the Act), holding any asset (including any financial interest) outside India as a beneficial owner or a beneficiary or have signing authority in any account located outside India, then you are mandatorily required to file income tax return before the due date even if the total income is below the taxable limit. In such cases, if you file your ITR after the deadline, late filing fees would be levied as per provisions of the law," says Jain.

Let us say in a financial year you earned a total income of Rs 1.5 lakh from dividend of shares you hold in a foreign company. In that case, even though your income is below the minimum exemption level of Rs 2.5 lakh, you are still mandatorily required to file ITR.

Taxpayers with gross total income less than the basic exemption limit, filing ITR after the due date will be able to claim deductions as available under section 80C to 80U of the I-T Act and/or tax refund, if due, without paying any late fees, adds Soni.

What you should do
Yes, there are some of you who will not be penalised for late filing your ITR, however, it is in your best interest to file ITR before the deadline if any tax refund is due. "This is because if the ITR is filed before the due date, then interest payable on tax refund will be calculated from April 1 of the relevant assessment year to the date on which refund is granted. In case a belated ITR is filed, even though no penalty will be levied as income is less than the tax-exemption limit, the taxpayer would lose out on some of such interest. In such event, interest will be calculated from the date of filing ITR to the date on which refund is granted," explains Chandak.

Also, you will not be able to carry forward losses if you file a belated return.

As per the income tax slabs applicable for FY 2017-18, for resident individuals below 60 years, total income up to Rs 2.5 lakh is exempted from tax. For senior citizens aged 60 years and above but less than 80 years, total income up to Rs 3 lakh is exempted from tax. For super senior citizens aged 80 years and above, total income of Rs 5 lakh is tax exempt.

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