Missed the ITR deadline? Here's what you need to do

In spite of all the reminders, hardly 5.83 crore Income Tax Returns (ITR) pertaining to the Assessment Year (AY) 2022-23 have been filed as of July 31. These are very much lower than the ITRs filed in the immediate preceding years: AY 2021-22 - 7.14 crore; AY 2020-21 - 6.97 crore; AY 2019-20 – 7.2 crore and AY 2018-19 – 6.53 crore.

Since AY 2015-16, the extension of the due date was a normal practice, compelled by delayed notification of the returns, courts’ directions, the introduction of the new e-filing portal, and year-long technical glitches thereafter. Another reason that could be added to the list would be the taxpayers’ laxity. But delayed ITR filing is going to cost them dearly in terms of interest, penalty and prosecution.

Belated return

In any case, if a taxpayer missed July 31 deadline, they can still avoid severe consequences to some extent, if not fully, by filing the due return latest by December 31, 2022, or before the completion of the assessment, whichever is earlier. For non-compliance, the belated return should accompany the applicable interest and late fee as follows:

Interest: If a taxpayer fails to furnish their return before the due date, they shall be liable for payment of interest under Section 234A of the Income Tax Act, 1961 (hereinafter 1961 Act) at 1 per cent per month or part thereof.

Late Fee: If a taxpayer fails to furnish their return before the due date, they shall be liable for payment of late filing fees under Section 234F of the 1961 Act of Rs 1,000 for taxpayers whose total income is not more than Rs 5 lakhs in Financial Year 2021-22 Financial Year and Rs 5,000 for taxpayers whose total income is more than Rs 5 lakhs.

Prosecution: If a taxpayer willfully fails to furnish a return of income on or before the due date, shall be punishable under Section 276CC of the 1961 Act with imprisonment of three months to seven years.

Reduced interest on tax refunds

Late filers will fetch lesser interest on their refunds, compared to those who filed on or before July 31, 2022. Their interest, if any, will be computed from the date of filing of the return. For instance, those who file the return with a refund of Rs 10,000 on August 8, will fetch interest from that day to the date of processing the return and not starting from April 1, 2022.

Note for serial defaulters

To compel defaulters to fall in line, an amendment has been brought into the Section 206AB and Section 206CCA of the 1961 Act to levy higher TDS/TCS on them. Accordingly, the rate of TDS/TCS shall be twice the specified rate or 5 per cent, whichever is higher with certain exceptions.

Courts also usually don’t come to the rescue of defaulters. The Supreme Court in Sasi Enterprises v. ACIT (2014) 361 ITR 163 (SC) clearly held that filing the return within the stipulated period is a duty cast on whoever has to declare the income. Later, by relying on the above, the Madras High Court in Dharampal R. Pandia v. Dy. CIT (2021) 435 ITR 301 (Mad.) held that the burden lies on the taxpayer to show that he had no wilful intention not to file the return, should file it within the stipulated timeline.

Can a defaulter straightaway file their old returns?

No. A person, who can’t file their return by July 31, December 31 or March 31, as the case may be, due to genuine reasons or difficulties or whatever, should first apply for ‘Condonation of Delay’ by logging in to the e-Filing Portal https://tinyurl.com/t2zkvbkp – Dashboard - Services - Condonation Request – For filing ITR after time-barred.

The request will be approved after due process. While furnishing the old returns, the taxpayer should select the option ‘filing under Section 119(2)(b) - After Condonation of delay’. Thus, a defaulter also can make good of the Income Tax Department records.

Concluding remarks

In spite of the social media being flooded with due date extension requests, especially with the Twitter hashtag ‘Extend Due Date’ trending continuously during the last seven days of July, the Finance Ministry has firmed up its decision to not extend the due date. Thus, ending the ‘extension practice’.

However, considering the pandemic-induced challenges, the Finance Ministry should come up with a ‘Late Fee-Free August Month’ and allow those who are yet to file the returns to file them before August 31 without any late fee. The revenue foregone through missed late-fee collections can easily be set off by buoyed income tax collections. It is true that revenue is required to run the economy, but at the end of the day, taxpayers’ or citizens’ well-being with a friendly tax regime should be paramount for any government.

(The writer is the Founder and chief executive officer of Shree Tax Chambers)