Missing ITR filing deadline can cost you much more than just late filing fee There are other benefits as well that an individual loses if the income tax return is filed after the expiry of deadline (i.e. belated ITR)
The deadline to file income tax return (ITR) for FY 2023-24 (AY 2024-25) is July 31, 2024. This deadline applies to taxpayers such as salaried individuals and self-employed individuals whose accounts are not required to be audited.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} An individual who misses the deadline can still file an ITR, but it will be termed as belated ITR. The deadline to file belated ITRs is December 31, 2024, for FY 2023-24 (AY 2024-25). Effectively, a taxpayer gets five months (August to December) to file a belated ITR.
Most taxpayers know that a penalty is levied for filing a belated ITR. However, late filing has other ramifications as well.
Penalty for late filing of ITR
First, let us understand the penalty. Under Section 234F of the Income Tax Act, 1961, a penalty of up to Rs 5,000 is levied for filing belated ITR. For small taxpayers, the penalty amount is restricted to Rs 1,000 if the taxable income does not exceed Rs 5 lakh.Penalty is applicable even in cases where belated ITR shows zero tax payable.
Penal interest on tax payable
Apart from a penalty, an individual has to pay penal interest on the pending tax payable while filing a belated ITR.Sujit Bangar, former IRS officer and founder of ITR filing website TaxBuddy.com, says, "A penal interest at the rate of 1% per month is levied under Section 234A (of the income tax Act) if there is tax payable while filing belated ITR. If any advance tax dues are pending, then penal interest of 1% under Section 234B and 234C is also levied, as applicable. The penal interest is calculated from April 1 till the date of filing the belated ITR."
Cannot opt for old tax regime and claim deductions under it
The new tax regime is the default tax regime from April 1, 2023, (FY 2023-24 onwards). Taxpayers have an option to choose this or the old tax regime. But an individual filing a belated ITR will not be able to opt for the old tax regime. Bangar says, "A taxpayer will not be able claim deductions and exemptions that are available under the old tax regime due to belated ITR filing. Further, tax liability will be calculated on the basis of income tax slabs under the new tax regime."This means that if you were planning to opt for the old tax regime and claim various tax exemptions/ deductions available under it to reduce your tax payable, this won't be possible if you file a belated ITR.
Cannot carry forward losses to reduce future tax liability
Taxpayers filing belated ITRs also lose the benefit of carrying forward of capital losses, if any exist. Consequently, they will not be able to reduce their future tax liability by setting off these losses against future gains. Bangar says, "Belated ITR does not allow carry forward of losses (except those from house property). Due to this, future capital gains cannot be set-off against carried forward losses."Under the income tax laws, losses can be carried forward for 8 financial years. These can be set off against future capital gains to reduce the taxable income and, thereby, the income tax payable. Income tax laws allow an individual to carry forward losses from capital gains, house property, business and profession, including speculation business and other sources.
Delay in getting income tax refund
Taxpayers waiting for income tax refunds will get their money only after their belated ITRs are processed. Bangar says, "Interest on income tax refund will be calculated from the date of verifying the belated ITR to the date the income tax department processes the ITR. This usually leads to a loss of interest on income tax refund. If the ITR is filed on time, then interest on income tax refund is calculated from April 1 to the date ITR is processed."#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
This story originally appeared on: India Times - Author:Faqs of Insurances
