Penalty for Late Filing of Income Tax Return (updated)

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Income Tax Return is required to be furnished before 31st July/ 30th Sept of the Assessment Year. However, if the return is not filed before the due date, both interest and penalty would be levied for the late filing of income tax return.

Both the Interest and Penalty levied are independent of each other and depending on the situation either both or one of them would be levied.

The manner of applicability of both interest levied as well as penalty has been explained below in this article.

Interest on Late Payment of Income Tax

Income Tax is required to be deposited with the Govt. in installments during the same year in which the income is earned. The income tax would be levied as per the income tax slab rates on the estimated income of the taxpayer and tax would be required to be paid on such estimated income.

The balance tax on the difference between estimated income and the actual income would be required to be paid at the end of the year.

This payment of income tax in installments during the same year in which the income is earned is called as Advance Tax. In case this Advance Tax is not paid as per the Schedule prescribed by the Govt, Interest would be levied @ 1% per month.

It should be noted here that income tax return cannot be filed till the time full income tax has been paid by the taxpayer. Income Tax Return can only be filed once full income tax has been paid by the taxpayer.

Penalty for Late Filing of Income Tax Return

If the income tax return is not filed before the due date of filing of income tax return i.e. before 31st July/31st Sept (as the case may be), a belated return under Section 139(4) can be filed at any time before the end of the relevant assessment year.

Therefore if the income is earned in the financial year 2017-18, the assessment year for the same would be 2018-19 and the return can be filed at any time before the end of relevant assessment year i.e. anytime before 31st Mar 2019.

However, for late filing of returns, a penalty of Rs. 5,000 would also be levied. This is a new change and is applicable from Financial Year 2017-18 onwards.

The penalty levied for late filing of Income Tax Return is as follows

Particulars Penalty
If ITR filed after Due Date but before 31st Dec Rs. 5,000
If ITR filed after 31st Dec but before 31st March Rs. 10,000

This penalty as mentioned above would be required to be paid before the filing of the Income Tax Return. In case the penalty is not paid before filing ITR, the ITR will not get accepted.

In extreme cases, where the taxpayer wilfully fails to furnish the return in due time, may also levy penalty under Section 276CC i.e.

  1. In a case where the tax is less than Rs. 25 Lakhs – the income tax officer may penalise with imprisonment for a term of 3 months to 2 years
  2. In a case where the tax exceeds Rs. 25 Lakhs – the income tax officer may penalise with imprisonment for a term of 6 months to 7 years.

However, these penalties are levied in a very rare case. In most of the cases, the taxpayer is only required to pay interest @ 1% for late deposit of income tax.

Consequences of Late Filing of Income Tax Return

Apart from penalty which would be levied for late filing of ITR, there are several other drawbacks of late filing of income tax return which have been discussed below:-

  1. Loss of Interest on Refund: If a refund is due to a taxpayer, interest on such refund won’t be paid for the period of delay in filing of income tax refund.
  2. Revision of Belated Return not possible: If the income tax return has been filed after the due date, such return cannot be revised by the taxpayer himself in case of any error.
  3. Some Deductions under Section 80 are not available in case of late filing of income tax return.

If the income tax return is not filed before the due date, the taxpayer won’t be allowed to carry forward losses arising under various heads except loss under head House Property and unabsorbed depreciation.

Karan is CA by Qualification with the rare distinction of being awarded All India Rank 22. He is also the founder of this website and loves to help people with their Tax Queries.