Income tax return filing deadline of July 31 needs to be extended: Will Budget 2025 provide this tax relief to salaried, other taxpayers? In addition to individual taxpayers' expectations for tax breaks, there has been a long-standing ask for sufficient time after the financial year-end to complete income tax return filings
Union Finance Minister Nirmala Sitharaman will be presenting her eighth Budget on February 1, 2025, just over 6 months after the previous one in July 2024. Changes were made in the July Budget to reduce the complexity of the capital gains tax calculations and give some income tax relief to salaried individuals.#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;}
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In addition to individual taxpayers' expectations for tax breaks, there has been a long-standing ask for sufficient time after the financial year-end to complete income tax return filings. Currently, the due date for filing original tax returns is July 31 of the "assessment year" (i.e., the year following the financial year in which income was earned) and the due date for filing the revised and belated return is December 31 of the assessment year. While income tax department have focused on automation of the income tax return filing process, these short filing deadlines have only created difficulties for taxpayers.
Also read | Union Budget 2025 Income Tax Expectations Live: Here is what India's middle class wants from FM Sitharaman in Budget 2025
We have discussed below some of these challenges.
Extend original ITR filing deadline.
Only 45 days window currently available For salaried taxpayers, employers are required to issue Form 16 only by June 15 of the assessment year. Accordingly, such taxpayers have only been getting a 45-day window to prepare and file their ITR. There are various activities which may need to be evaluated and considered before filing ITR such as bank accounts statement reconciliation, analysis of joint income with spouse, collating Form 26AS, Annual Information Statement (AIS), arranging funds for paying balance taxes, etc. Further, even for capital gains calculations, there may be multiple sources from which information needs to be collated. For example sale of shares, mutual funds, bonds, properties, etc.
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Also read | Will Budget 2025 give any income tax relief under old tax regime?
Considering the number of ITRs that get filed and the short period of 1.5 months available for filing the income tax returns, the income tax portal tends to face an excessive load. As a result, taxpayers often face technical glitches on the e-filing website during the last few days while filing income tax returns.
Collating overseas income and assets detailsFor taxpayers who qualify as ordinary resident in India, it is a mandatory requirement to report all overseas incomes and assets. For countries which follow different tax periods (calendar year or otherwise), it is difficult for taxpayers to collect and collate the relevant details for the financial year in India. Even for those countries which follow a financial year, income tax returns of overseas jurisdictions are generally not available before July 31. If additional time is allowed for filing income tax return, it will ease the situation for such taxpayers, especially those who need to claim credit for foreign taxes.
Consequences of missing July 31 deadline If the original ITR is filed within the deadline of July 31, individual taxpayers get the option to choose between the old and new tax regimes. However, if this short deadline is missed, individuals may incur additional tax liability while filing a belated tax return. This is because the option to opt for the old tax regime would not be available. Also as per the income tax rules, in case of belated return filing, the taxpayer cannot carry forward losses for the year (except house property loss). Further, additional interest (on any pending tax payable) and late filing fees of up to Rs 5,000 are levied which can create significant financial impact for certain taxpayers.
Based on above, the due date for filing the original return should be extended at least till August 31 instead of July 31.
Extend deadline to file revised and belated return
Unavailability of overseas tax return (especially for countries following calendar year or otherwise as their tax year)Taxpayers qualifying as Resident and Ordinarily Resident (ROR) in India are taxable in India on global income and have to report global assets and liabilities in their income tax returns in India. Many countries such as United States, Canada, Singapore follow the calendar year as their tax year. It is difficult to gather income and asset details for these countries before the revised return filing deadline. For example, in the US, tax returns for calendar year 2024 would be finalised only in April 2025 at the earliest. However, in India, the revised, belated returns can be filed for FY 2023-24 (AY 2024-25) only till December 31, 2024 to claim the credit for taxes paid from Jan to March 2024, which will be finalized only after the 2024 US tax return.There can be various scenarios, where ROR taxpayers are required to claim foreign tax credit for taxes paid outside of India. Further, there can be various types of tax benefits under the Double Tax Avoidance Agreement (DTAA), required to be claimed by such taxpayers. To ensure these calculations and reporting are done accurately, overseas tax returns and payment proof are essential requirements. If the due date for the belated, revised return filing is not extended, the Foreign Tax Credit (FTC) claims and DTAA relief would be based on the taxes deducted at source and income reported in payslips in the overseas country. This may lead to litigation in case of an audit by the Income tax department.
Also, there are penal implications under the Black Money Act and Income Tax Act on account of underreporting or mis-reporting of foreign income and assets. Hence, availability of details of overseas income, final tax liabilities, assets details, etc. is crucial.
Additional interest and penalty for tax payable cases If the deadline for revised, belated return is missed, the only option available to the taxpayer is to file an updated tax return. This option comes with penalties. Updated return can only be filed if there is an additional tax liability in the ITR i.e., it cannot be filed if an updated return results in lower tax liability, claiming or enhancing tax refund amounts, etc.
Taxpayers can file an updated return within two years from the end of the relevant assessment year i.e., for FY 2023-24, revised / belated tax return deadline is December 31, 2024 and updated return filing can be done from April 1, 2025, till March 31, 2027. Accordingly, for FY 2023- 24, during the period January 1, 2025, till March 31, 2025, no tax returns can be filed. If there are balance tax liabilities to be paid, this leads to additional interest implications on the taxpayers.
The due date for filing revised/belated returns could be extended at least until March 31 of the assessment year. This can help taxpayers avoid under reporting or misreporting of foreign income/assets and avoid incurring penalties and interest levies.
The article is written by Alok Agrawal, partner with Deloitte Touche & Tohmatsu India LLP, and Vikas Birla, director and Dhananjay Kumar, manager with Deloitte India.
#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;} (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
This story originally appeared on: India Times - Author:Faqs of Insurances
