JOIN USWhat will happen if you file late returns?
Even though the government collects taxes through the TDS, the tax laws say that a return must be submitted when gross total income from all sources (before allowing deductions) exceeds Rs 2,50,000.
Refund seekers must also submit their returns by e-filing, irrespective of their taxable income. Those who have foreign income or assets, or bank accounts or hold financial interest or equity outside India have to compulsorily file a return. Besides these obligatory reasons, submission of your returns may be very helpful at the time of seeking visa or loan, where it may serve as a proof of your financial status.
This year is an exception as the government had to extend the due date twice so that tax payers can submit returns on time.
Let’s look at the implications if you have missed the due date September 7, 2015, to file your tax returns.
Carry forward of losses: Capital losses are allowed to be set off against capital gains. Short term losses can be set off against both the long term and short term gains, while long term losses can be set off only against the long term gains. Losses that remain after this set off are allowed to be carried forward to future years for set off. They can be carried forward for maximum eight years. If you haven’t submitted your return by the due date, you won’t be allowed to carry forward your capital losses. Do note that the long term capital loss from sale of shares or equity funds is a dead loss and cannot be set off or carried forward.
Where tax filing is delayed due to genuine reasons and impacts carry forward and set off of loss, taxpayers can refer to CBDT’s circular (circular 9/2015 dated 9-6-2015) for condoning or pardoning of delay. If return has been submitted after due date, the delay may be pardoned if the conditions listed in the circular are met and procedure for condoning is followed.
Revision not possible: One of the greatest drawbacks of a delayed filing is that such a return cannot be revised. Be careful about making mistakes as returns submitted after the due date are not allowed to be revised. Do seek professional help and take extra caution to file your returns if you are filing after September 7.
Where tax is due: Many a times a tax due shows up when we aggregate our income from all sources in the return. This can happen when you include income from fixed deposits or savings account interest, since TDS deduction for them may not have happened or may be insufficient.
Any tax due which is not paid by March 31, usually attracts interest under section 234B and 234C. And if tax is payable and return is being filed after the due date, interest under section 234A is also applicable. This interest is charged at 1 per cent simple interest, where days are rounded off to a full month. So if you have tax due and you file after September 7, you’ll have to pay interest under section 234A.
Where a refund is due: If you have a refund due from the tax department you have no good reason to delay your return. This year refunds are being processed within a few weeks of filing. Do remember that though taxpayers who have a refund due cannot file a paper return, they must compulsorily e-file.
Penalty for filing after the end of assessment year: It’s easy to be lax about your return, when you have no refund and no dues. However, the assessing officer can levy a penalty of Rs 5,000 under section 271F if your return is filed after March 31, 2016. So don’t put if off for later, and file your return at the earliest.
The government may use the data it collects from tax returns to formulate future policies and timely submission of your return is an important part of this process. Do submit your return without further delay.
(Preeti Khurana is a Chartered Accountant and Chief Editor at www.cleartax.in, a tax e-filing website for individuals and businesses.)