While the income tax dept allows ITR late filing until one year from the end of the relevant financial year, you will need to pay a penalty and may lose some benefits

The deadline to file income tax returns (ITR) got over on 31 August, after being extended by a month, for assessment year (AY) 2018-19. The total number of ITR e-filings between 1 April and 31 August 2018 was 54.2 million against 31.7 million in the same period in 2017, an increase of 70.86%, according to the income tax department. However, the numbers are still lower than the total number of returns filed (67.5 million) during the entire financial year 2017-18.

Clearly, many people are still to file their ITR. If you are among those who missed the deadline to file the ITR for AY 2018-19, you would need to file a belated return. The department allows you to file returns till one year from the end of relevant financial year, in case you miss the deadline. This means that for financial year (FY) 2017-18, which ended on 31 March 2018, you can file returns till 31 March 2019.

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While the income tax department allows you to file belated returns, you would have to pay a penalty and face certain restrictions. From this year, AY 2018-19, you have to mandatorily pay a penalty for filing returns after the deadline; it was not mandatory till the previous AY. Also, you would miss out certain benefits you could have availed if you had met the deadline.

Here are the rules regarding late ITR filing:

The restrictions

When you file a belated return, you are not allowed to carry forward certain losses. For instance, business and capital losses can be carried forward by being adjusted against gains in subsequent years, but only if the tax return is filed within the due date.

However, “loss under the head ‘income from house property’ and unabsorbed depreciation will be allowed to be carried forward even if return of income is filed after the due date,” said Suresh Surana, founder of RSM Astute, an audit, tax and consulting firms.

Losses and penalties

From the current AY, there is mandatory penalty that you have to pay if you are filing a belated return.

According to Section 234F, which was introduced in The Finance Act, 2017 and is applicable from AY 2018-19, “if taxpayer fails to file return of income within the due date, he shall have to pay a fee of ? 5,000 if the return is filed after the due date but before 31 December of that year and ? 10,000 if return is furnished after 31 December. However, if total income of the person does not exceed ? 5 lakh, the fee payable for late filing of return will be restricted to ? 1,000,” said Surana.

ITR late filing penalty for AY 2018-19 has to be paid, irrespective of whether there is any tax due or not. “Late filing fee is a mandatory levy which shall be charged even if there is no pending tax or there are reasons for delay. Its quantum is ascertained by the total income and not the amount of tax payable,” said Neha Malhotra, executive director, Nangia Advisors LLP.

Though the penalty is mandatory, some experts believe that in certain genuine cases, the department can give a relaxation. “Fees under Section 234F will be levied irrespective of having genuine reasons for filing belated return. However, the Central Board of Direct Taxation, or CBDT, may grant condonation for delay in filing claim for refund or carry forward of losses if the claim is correct and genuine and it is a case of genuine hardship,” said Surana. For instance, considering the Kerala floods, CBDT has extended the due date for income tax assesses based out of Kerala by 15 days. They can file their returns till 15 September without paying any penalty or restriction for the delay.

Besides, if there is any tax due even after you have paid advance tax, tax deducted at source (TDS) and self-assessment tax, then, according to Section 234A of the Act, interest will be applicable at the rate of 1% per month on the due amount up to the date of filing the return. This means that interest will be applicable on tax that is still to be paid on your income for AY 2018-19. For instance, if there is a due of ? 50,000 as tax on your income, you will have to pay ? 500 (1% of ? 50,000) as penal interest for delay each month till you file your return.

This interest payment on tax due will be in addition to the late filing penalty.

Interest loss on refunds

You also stand to lose the interest paid on any tax refund that you claim if you are filing belated returns.

When filing your ITR, you can claim refund for excess tax paid on your income during a financial year. You are also entitled to earn interest on the amount of refund that the department has to pay. “Under section 244A of the Income Tax Act, 1961, in case where taxpayer has a refund position, he/she is eligible to receive interest on the refund from income tax department at the rate of 0.5% per month for period starting from the 1 April of the assessment year (for FY 2017-18, the period shall commence from 1 April 2018) till the date when refund is granted,” said Surana.

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However, in case you are filing belated returns, you may lose the interest that would be due on the refund, because delay in filing would be your mistake. In such cases, interest will be paid from date of furnishing the return to the date of grant of refund.

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Remember that,“tax authorities may even initiate prosecution against the taxpayer if she wilfully does not furnish the return by end of the relevant assessment year and the amount of unpaid tax (after deduction of advance tax and TDS) exceeds ? 3,000,”said Malhotra.

Therefore, it is prudent to pay the penalty and file belated returns, especially if you have tax liabilities.