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Penalties and exclusions for late filing of I-T returns
September, 04th 2012

Have you missed the deadline for filing tax return again? Oh, yes! The last date to file your income tax return, or ITR, was August 31. However, you don't have to panic. You still have time till July 31, 2014 to file your ITR, both online as well as offline.

"For the financial year 2011-12, an individual with a total income of up to Rs 10 lakh can file income tax return offline by March 31, 2014, and an individual having total income of more than Rs 10 lakh can file his/her return online by March 31, 2014," says Sonu Iyer, tax partner and national leader, human capital mobility services, at Ernst & Young.

However, you should know the consequences of such late filing of return. First, you cannot revise your ITR. Second, you cannot carry forward losses. And third, you have to pay a penal interest of 1 per cent per month on your outstanding tax liability. Also, remember that you cannot file the ITR for the financial year 2011-12 beyond March 2014, even if you are willing to pay the penalty.

You cannot revise ITR

A return filed after the due date is considered as a belated tax return. Under the law, a belated tax return cannot be revised. However, there may be some details which are not available till the due date. "In such a case, the Act allows filing of a 'belated return' within one year from the end of the assessment year or completion of assessment, whichever is earlier. However, you have to forgo the right to carry forward your losses or revise the return," says Vineet Agarwal, director, KPMG.

You can't carry forward losses

The loss under the head 'Profits and gains of business or profession' (other than depreciation loss) cannot be carried forward if the return is filed late. "However, one can still set off the losses against the income (other than income under the head salary) under other heads of the same year," says Vaibhav Sankla, director, H&R Block India. This also applies to any short-term or long-term capital loss from sale of shares. "It can be carried forward and set off against capital gains / business profits which may arise in the next eight years. However, if the tax return is not filed within the due date of August 31, 2012, the above benefit is not available," cautions Sonu Iyer.

Moreover, in case you want to claim foreign tax credit based on foreign tax return received later, you will not be able to do so if the original tax return is filed after the due date.

Penalty on outstanding taxes

You must pay a simple interest at 1 per cent per month on the outstanding tax liability up to the date of payment of the tax. "Apart from interest, which is levied under various sections of the Income-Tax Act, 1961 ('Act'), interest is also levied if the tax return is not filed within the due date. As per Section 234A of the Act, an interest is levied at 1 per cent per month from the due date of filing the return to the actual date of filing on the tax payable, subject to certain conditions," says Vineet Agarwal.

If you realise you have to pay additional taxes as a result of the error, you can pay off the tax without filing the revised return. Subsequently, you can even follow this up with a letter to the jurisdictional tax officer. This way you can avoid additional income tax liability on account of interest/penalty should the tax department later demand the outstanding taxes.

Procedure for filing returns

There is no difference in the procedure for filing ITR before or after the deadline. "The procedure to file a return remains the same irrespective of the time of filing. However, an individual should mention that the return is a belated return," says Vineet Agarwal. While filing the ITR, select the return filed section code as "12" in the tax return form. This is applicable for both online as well as offline filing of tax return.

Financial consequences of belated filing

There are two possibilities of incurring a financial penalty for filing returns after the due date. Under Section 271F of Income Tax Act, there is a provision whereby the assessing officer may slap a penalty of Rs 5,000, if an individual fails to furnish ITR before the end of the relevant assessment year. In this case, the current assessment year ends on March 31, 2013. Hence, if the return is filed after March 31, 2013, the assessing officer can levy a penalty up to Rs 5,000. However, tax experts say that this provision is rarely exercised by the assessing officer. "When there is an additional tax liability (in addition to what is deducted at source), then penal interest is payable under Section 234A on delayed filing of tax return," says Vaibhav Sankla.

"Salaried individuals who do not have an additional tax liability (i.e. in addition to what is deducted from their salary) or do not have to carry forward tax losses can file returns even after August 31, 2012. However, belated return (i.e. returns filed after August 31, 2012) cannot be revised," adds Sankla.

Delay in tax refund

You are eligible to get tax refunds irrespective of the date of filing the tax return. In general, the earlier you file the return, the earlier you receive the refund. Late filing of return delays refund. Further, interest on refund, wherever applicable, is also reduced to an extent if the return is filed late.

If you are a salaried individual and your employer deducts TDS systematically and you have no extra taxes payable, there may be no consequences if you filed the ITR after August 31.

However, ensure that you file the ITR before March 2013 just to avoid financial penalties, although you have time till March 2014.

 
 
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