Penalty for Late Filing Income Tax Returns
Penalty for Late Filing Income Tax Returns
The due date for filing income tax return for individuals is 31st July of every year. For companies and LLPs that require a tax audit, the due date for filing an income tax return is 30th September. In this article, mention the penalties which can be imposed by the income tax department for late filing of income tax returns.
Consequences of Late Filing of Income Tax Return
Taxpayers who do not file their income tax return on time can be subject to penalty and charged interest on the late payment of income tax. In addition to the penalty and interest for late payment, the taxpayer would also have to face the following consequences:
- The taxpayer will not be able to claim any interest on the delay in a refund for the period of delay in filing income tax returns.
- Taxpayers who file income tax returns after the due date will not be eligible to rectify the income tax return filed, in case of any errors.
- Some income tax deductions under Chapter VI-A of the Act will not be allowed if the taxpayer files late return.
- The taxpayer will not be able to set off losses incurred (other than house property loss).
Penalty for Late filing Income Tax Return – With Effect From 1st April 2018
In the 2018 Budget announcement, a new section, 234F has been announced by the Government. Section 234F will be applicable for returns filed for the financial year 2017 – 18 onwards. This means that a penalty as mentioned below will not be applicable for income tax returns filed for the financial year 2016-17 or assessment year 2017- 18 and before. Under Section 234F, an individual would have to pay a penalty of upto Rs.10,000 for late filing income tax return after the due dates as follows:
- A penalty of Rs.5000 will be applicable for returns filed after the due date of 31st July but before 31st December of the relevant assessment year.
- In case an income tax return is filed after 31st December, a penalty of Rs.10,000 will be applicable.
- For assesses with a taxable income of upto Rs.500,000, a reduced penalty of Rs.1000 will be applicable.
Section 234F – Penalty for late-filing of Returns
Section 234F was introduced in the year 2018 which provided details on the penalty amount of delayed or late filing of Income Tax Return. This penalty would be added to the existing interest charges (under section 234A) for delayed or late filing of IT returns. There are other sections are available apart from Section 234 which are explained below:
Section 234A – Interest on delayed filing of Returns
As per Section 234A, the penalty will be calculated as interest charges. This section is applicable if the taxpayer:
- has not paid tax on time
- has not submitted Form-16 after shifting from one company to another, or
- fails to comply with any other provisions of the Direct Taxation laws and regulations.
Section 234B – Interest on delayed payment of Advance Tax
As per Section 234B, if the taxpayer delays the payment of advance tax, the taxpayer has to pay along with the interest if the advance tax amount is less than 90% of the assessed tax. In precise, the amount of penalty interest will be added in the following conditions:
- The payment of advance tax is delayed
- The advance tax is paid but not in entirety
Section 234C – Interest on deferred payment of Advance Tax
This section is applicable when the taxpayer has not paid the interest to the delayed payment of advance tax (as per Section 234B).
Note: For all these categories under penalty of delayed IT returns, there will be minimum of 1% of interest rate are applicable.
Penalty for Late filing Income Tax Return – Applicable upto FY 2016-17
Under the old provisions applicable for income tax returns filed up to FY 2016-17, taxpayers who late file their income tax return could be subject to a penalty of Rs.5000.
However, the penalty of Rs.5000 for late filing of income tax return is not automatically levied. In case an Income Tax Officer issues a notice for late filing of income tax return, the taxpayer would have to pay the penalty of Rs.5000. Hence, the amount of penalty which should be levied in connection with the late filing of income tax returns is exclusively based on the decision of the assessing officer.
Section 276CC of Income Tax Act – Penalty for Late Filing
In some cases, where the taxpayer has willfully and deliberately failed to file income tax return action can be initiated under Section 276CC of the Income Tax Act. The penalty under Section 276CC for late filing of income tax returns where the amount of tax payable or evaded is more than Rs.25000 is imprisonment of 6 months to 7 years and a fine. In all other cases prosecuted under Section 276CC, the penalty would be 3 months to 3 years of imprisonment with fine. The text of the section is as follows:
“If a person willfully fails to furnish in due time [the return of fringe benefits which he is required to furnish under sub-section (1) of section 115WD or by notice given under sub-section (2) of the said section or section 115WH or] the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under [clause (i) of sub-section (1) of section 142] or section 148 [or section 153A], he shall be punishable,— (i) in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds twenty-five hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; (ii) in any other case, with imprisonment for a term which shall not be less than three months but which may extend to three years and with fine.”
Interest on Late Filing of Income Tax Return
Whenever the income tax return is not filed on or before the due date, the taxpayer would be required to pay interest at 1% for every month or part of a month where there was a delay in filing the tax return. It is important to note that income tax return cannot be filed until the tax dues are paid. Hence, interest for late filing would be charged from the date immediately after the due date and ending on the date of payment of taxes due and furnishing of the tax return.