Consequences of not Filing Income tax return in time
The season of Income tax return is in full swing with first due date closing fast. In certain circumstances, even if all your taxes have been paid, the filing of return of income is compulsory. In fact, filing return by the deadline is even more so important for AY 2017-18 in case cash deposits of Rs 2 lakh or more was made for the period 09-Nov-2016 to 30-Dec-2016.
Apart from risking a Notice from the department, the assessee will lose following benefits in case of delayed return.
Loss in Interest on refunds
The interest on the refund is computed from 01-April of the assessment year till the date of grant of refund if the return has been filed in time. In the case of a belated return, interest is computed from the actual date of filing the return till the date when the refund is granted. For example, Ms. A files her return of income on 01-Aug-2017 (Due date: 31-Jul-2017) for AY 2017-18 and declares refund of Rs 25,000/-. Now due to the delay of a single day, she would lose interest on the refund for the period Apr-July, i.e., four months.
No carry forward of losses
In the case of a belated return, the assessee would not be allowed to carry forward the losses of following heads:
Income from business and profession,
Income from speculative business,
Income from Capital gains, and
Income from other sources.
Liability to pay Interest on tax & Penalty
If there is any unpaid tax liability, then as per Section 234A, the belated return would result in levy of penal interest @ 1% per month from the due date of filing the return till the actual date of filing.
Also, under certain circumstances, Penalty of Rs 5,000 may be charged for belated returns.
From AY 2018-19, a belated return would result in a penalty of Rs 5,000 in case of returns filed up to 31st December. If returns are filed after 31st December, a penalty of Rs 10,000 shall apply. Although, penalty will be restricted to Rs 1,000 if income is not more than Rs 5 Lakhs.