Many people either fail to file their income tax returns (ITRs) on time or neglect to file them altogether due to lack of awareness or sheer lethargy.
Some mistakenly believe that just because their employer deducted tax at source (TDS) when paying their monthly salaries and issued the usual Form 16, they (employees) have no additional tax liability. They assume that paying TDS is like filing a tax return. But that’s not the case.
Individuals with lower incomes often think they are exempt from filing returns. However, there are other criteria beyond how much you earn that necessitate filing an ITR. Failing to file by the stipulated time can lead to not-so-pleasant consequences. Read more to understand these requirements and avoid potential penalties.
When do you need to file the ITR?
Filing an ITR is mandatory for individuals whose income, before exemptions and deductions, is above the threshold limit. For the financial year 2023-24, the exemption limits are Rs 2.5 lakh for individuals below 60 years, Rs 3 lakh for those aged 60 to 80 years, and Rs 5 lakh for those above 80 years.
Also read – 10 Common Mistakes Taxpayers Make When Filing Income Tax Returns
There are other situations where you must file a return. For instance, if you have deposited more than Rs 1 crore in one or more current bank accounts, spent more than Rs 2 lakh on foreign travel for yourself or someone else, or spent more than Rs 1 lakh on electricity bills, you need to file a tax return.
For business owners, filing becomes mandatory if the total sales, turnover, or gross receipts exceed Rs 60 lakh, and for professionals if the gross receipts from a profession exceed Rs 10 lakh. It is also required if the total tax deducted and collected is Rs 25,000 or more (or Rs 50,000 for those aged 60 or above), or if the aggregate deposits in savings accounts exceed Rs 50 lakh.
Even if advance taxes have been paid, they must be reported through the ITR to complete the self-assessment of income and taxes. Filing a return helps reconcile records between the taxpayer and the Income Tax Department. Additionally, if you have incurred a financial loss that you want to carry forward to offset future income, you must file your return before the due date.
Also read – Six New Income Tax Rules Effective from October 1, 2024
What if you do not file your return?
The ITR must be filed by July 31 of the assessment year. For 2023-24, the assessment year is 2024-25, so the ITR for FY24 should be filed by July 31, 2024. However, a belated return can be filed till December 31.
There are several consequences of not filing an ITR, ranging from penal interest and late fees to potential imprisonment, especially if you are required to file a return.
If you file a return after the due date but within the timeline for filing a belated return, you will incur a late fee with interest payable.
“A taxpayer would be liable to pay simple interest under Section 234A of the Income-tax Act at the rate of 1 percent for every month or part of a month commencing from the date immediately following the due date, i.e., July 31, to the actual date of furnishing of the return,” said Suresh Surana, founder, RSM India, a tax consultancy.
Besides, “a taxpayer would be additionally liable to pay late fees under Section 234F of Rs 5,000 if the return is furnished after the due date specified under Section 139(1). However, if the total income of the person does not exceed Rs 5 lakh, such late filing fee shall be restricted to Rs. 1,000,” added Surana.
If you fail to file even a belated return, you may face severe consequences, including fines and potential imprisonment.
“The Income-tax Act provides for prosecution provisions under Section 276CC for wilful failure to furnish return within the deadline,” said Surana.
Surana expanded, “A person can be prosecuted with imprisonment and fine for wilful failure/ default in filing of ITR. Imprisonment can extend for a period from three months to two years if tax evaded on account of failure to file ITR exceeds Rs 3,000. In cases where the tax evasion on account of failure to furnish ITR exceeds Rs 2,500,000, such person can be subjected to rigorous imprisonment for a period of six months which could extend up to seven years along with fine.”
Therefore, it is always better to file your return before the due date. If you find it difficult, seek help from a tax expert or chartered accountant to fulfil your responsibility and avoid the aforementioned consequences.
