Tax payers, auditors and tax masters go extremely busy filing taxes and working on refunds in July. July 31 is usually the cut-off for filing your returns, which is set by the Central Board of Direct Taxes (CBDT). This year, the deadline has been extended till August 5, which is today.

Do I need to file my returns? What are the criteria to file the returns? Is it mandatory for all the taxpayers to file the returns in the same assessment year? What happens if I miss to file the returns on or before July 31?

If you have such questions in mind, you have come to the right place.

Who needs to file returns?
For those whose taxable income exceeds Rs 2 lakh in a financial year by way of income from salary, house property, capital gains and income from other sources, the returns need to be filed on or before July 31 every year.

For income from business or profession, the last date of filing return is September 30 every year.

Is the return filing process cumbersome?
Not at all. The CBDT has made the tax filing process easier than before. It is mandatory to file returns online in case the taxable income exceeds Rs.5 lakh per year.

First you need to register your PAN in the incometaxindiaefiling.gov.in website. There are forms available like ITR 1, ITR 2, etc.

You need to choose the forms based on your income source and fill the same. Then the form has to be uploaded. You will receive an acknowledgement, ITR V, for the return filed online.

Take a print out, sign it and send it to the central processing centre in Bangalore within 120 days from the date of filing. Your return will be considered as filed only after the receipt of the ITR V. There is no need to send the ITR V if you are having digital signature.

What happens if I do not file my returns on or before the deadline?
As per the section 234 in the Income Tax Act, there are various penalties and implications attached to delay in filing or non-filing of your returns.

Interest under section 234 A for delay in filing of return after July 31
If you need to pay tax and have filed return after July 31 then you have to pay interest of 1 per cent for every month for the tax due for delay in filing of returns. For example, suppose you need to pay Rs 50,000 as tax for the financial year 2012-13. Your company has deducted TDS of Rs 30,000 and you didn't pay the remaining Rs 20,000 within the due date. You have decided to file your return in the month of October 2013. Then you have to pay interest of Rs 600 for the delay of return filing under section 234 A.

Interest under section 234 B for nonpayment of advance tax
Any tax payable has to be paid on or before March 31 every year. If the tax liability exceeds Rs 10,000 in a financial year and has not been paid on or before March 31, then 1 per cent interest will be charged for every month because of nonpayment of advance tax.

As per the above example, the interest to be payable under section 234 B is Rs 1,400. This is in addition to the interest levied under section 234 A.

Also, there will be additional interest levied under section 234 C for non-payment of advance tax within the specified deadline.

Discretionary penalty
If you have not filed returns even after one financial year from the assessment year, you need to pay the discretionary penalty of Rs 5,000. Say, for example, you have not filed the returns for the last assessment year, 2012-13, you can file it in the current assessment year 2013-14 without any penalty.

But if you are missing it this year too and filing it in the next assessment year, 2014-15, you need to pay the penalty of Rs 5,000. In case of non-payment of full or partial tax in the current or subsequent financial year, you will end up paying the penalty of Rs 5,000 plus 1 per cent for each month.

Capital loss to be carried forward
In case of capital loss, it is mandatory to file it before July 31 of the assessment year. The capital losses are not allowed to be carried forward if you file your return beyond the due date. However, in case of capital loss due to selling your property, land or a house, you are allowed to take it forward even if you are filing late.

Revised filing
It is very, very important to remember not to make any mistake while filing tax returns. If so, you need to file a revised return. If you file your return online then the necessary rectification should also be done online only.

Delayed filing of your taxes will not affect getting refund, if any. However, not only avoiding penalties, filing your returns on time will save you in many situations. If you want to apply for a visa to any country like USA, Europe, UK and all, it is mandatory that you submit the documents related to income tax filing.

There are also processes involved while getting loans from banks where you will be asked to submit the IT-related documents. Not paying or filing returns on time may lead to rejection of visa or loans.

K. Ramalingam is the chief financial planner at Holistic Investment Planners, a leading financial planning and wealth management company. The opinions expressed here are the personal opinions of the author. NDTV is not responsible for the accuracy, completeness, suitability or validity of any information given here. All information is provided on an as-is basis. The information, facts or opinions appearing on the blog do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.