Did you miss the August 5 deadline for filing tax returns? If yes, do not worry. There is no reason to panic. You can still file your income tax returns within two years from the end of the relevant financial year (FY). This means you can file returns for FY16 till March 31, 2018.
But, here is a small issue: As is the case with everything, the income tax department also rewards punctuality. So, if returns are filed on time, certain benefits are available to tax payers. Once you have missed the deadline, these benefits are not available.
“When a late return is filed, one is not allowed to carry forward certain losses. For instance, capital losses can be carried forward for the next seven assessment years, from the end of the relevant assessment year and can be adjusted against gains during these years, but only if the tax return is filed within the due date,” says Rahul Garg, leader, direct tax practice at PricewaterhouseCoopers India.
Changes or modifications cannot be made if you are filing tax returns late. It is available only when the returns are filed on time. “If there are any taxes due after adjusting advance tax paid, tax deducted at source (TDS) and self-assessment tax, then, according to section 234A of the Income Tax Act, 1961, interest will be applicable at the rate of 1 per cent per month on the due amount up to the date of the filing of the return,” says Archit Gupta, founder, Cleartax, an online tax return filing company.
For example, if your pending tax liability for the year ended March 2016 is Rs 20,000 and you plan to pay this along with your delayed tax return in November 2016, you will have to shell out 1800 extra for the four-month delay in return filing (August to November).
Whether you file on November 1 or November 30, a part of a month, a day even, is considered as whole month for interest calculation on delayed filing. Filing on time will save you from this interest outgo.
Experts are of the opinion that even if tax return is not filed within the due date, the due taxes should be paid on time to ensure that interest implications come to a halt. Interest for delay in the filing of return is payable only on the tax due at the time of filing return.
Anecdotal evidence suggests that refunds are processed faster if you file returns on time. “Also, under section 244A, one is entitled to get a refund along with interest. But for a belated return, interest on refund will be payable only from the return filing date. Thus, you lose the interest from the start of the assessment year till the belated return filing date. This is because a delay in filing is considered as a mistake on taxpayer’s part,” says Garg.
When you file late, you not only lose interest on the refund, you may be charged a penalty of Rs 5,000 (under section 271F) if you file after the expiry of the relevant assessment year or one year from the end of the relevant financial year. It completely depends on the assessing officer’s decision. In cases where a taxpayer wilfully delays filing, there are provisions for a higher penalty and imprisonment. “The recent Budget has cut timeline for filing belated tax returns. So, next year (ending March 2017) onwards, you can file the returns only till the end of the assessment year; the one-year grace period has been done away with,” says Gupta of Cleartax.
Government’s tax filing system has been switched off for accepting returns beyond two years for now and one year from next year onwards.
What if you have received your Form 16 late? You can still file your returns on time by doing a proper income assessment. Take your salary slip and download form 26AS (the TDS deposit form) from the tax department’s website. This will give you an idea about how much TDS has been deducted from your income.
There is also a minor change in this year’s return filing. People with gross income above 150 lakh are required to declare their assets and liabilities. Considering that your tax return statement is one of the major documents needed for getting a home loan, do not waste any more time. File on time and save yourself from unnecessary hassles.