Beware of the consequences of filing of Income-tax return late!
Published: May 22, 2018
By Samir Shah and Jason Sanctis
THE due dates for filing Income tax return are approaching. The dates are given in the table below:
|
Type of tax payer
|
Due date
|
| Corporate tax payer, non-corporate tax payer who are subject to audit and working partner of a firm | 30 September 2018 |
| Tax payer who is required to submit transfer pricing report | 30 November 2018 |
| Other tax payer | 31 July 2018 |
For widening the tax base, the government of India recently made many changes with regard to filing of tax return on or before due date and also on the consequences of not filing the return on time. This article discusses the consequences if you have missed filing tax return on or before the due date.
Loss of deduction admissible under Chapter VIA – Section C
Earlier, a tax payer was not eligible to claim deduction under section 80-IA, section 80-IAB, section 80-IB, section 80-IC, section 80-ID or section 80-IE, unless the return had been filed by the due date. The Finance Act, 2018 has widened the scope of section 80AC to provide that benefit of deduction under the entire class of deductions under the heading "C.-Deductions in respect of certain incomes" in Chapter VIA, shall not be allowed unless the return is filed by the due date. The class of deductions starts from section 80HH and ends with section 80RRB.
Therefore, apart from the aforesaid deductions, to now claim deduction under section 80JJAA viz. deduction in respect of employment of new employees, section 80LA viz. deduction in respect of certain incomes of offshore banking units and international financial services centre and section 80P viz. deduction in respect of income of co-operative societies, the tax payer is required to file return on or before due date.
Loss not allowed to be carried forward
If return is not filed on or before due date, loss under the head "profits and gains from business or profession", "capital gains" and "loss from the activity of owning and maintaining horse races" are not allowed to be carried forward.
Fee for late filing of return
From assessment year 2018-19, the Finance Act, 2018 has discontinued penalty of Rs.5,000 which was levied if return was filed after the end of the relevant assessment year. However, it has introduced fees for late filing of return after the due date as under:
|
Particular
|
Fee (Rs.)
|
| If return is filed on or before the 31 st day of December of the assessment year | 5,000 |
| In any other case | 10,000 |
| If total income of the person does not exceed Rs.5,00,000, the fee payable shall not exceed Rs.1,000. | |
Interest under section 234A
If return is not filed by due date then on shortfall of tax, tax payer is liable to pay interest under section 234A, @1% per month, from the date immediately following the due date and where the return is filed after the due date, ending on the date of filing of the return and where no return has been filed, ending on the date of completion of the assessment under section 144 of the Income-tax Act.
Interest under section 244A
Where refund of any amount becomes due to the tax payer, tax payer is eligible for interest under section 244A, @ 0.5% per month. Earlier, if tax refund is arising out of advance tax and TDS, interest under section 244A was granted from 1 April of the assessment year. As per the Finance Act, 2016 with effect from 1 June 2016, if return is filed beyond due date and refund is arising out of advance tax and TDS, tax payer is eligible for interest under section 244A from the date of filing of the return instead from 1 April of the assessment year.
As per Finance Act, 2016 with effect from 1 June 2016, in a case where refund is arising out of self-assessment tax, tax payer is eligible for interest under section 244A from the later of the dates of filing of return or payment of tax. Therefore, from 1 June 2016, even if self-assessment tax is paid earlier, tax payer is eligible for interest under section 244A only from the date of filing of the return.
Prosecution
If a tax payer wilfully fails to file return before due date and tax evaded is more than Rs.25000, he shall be punishable with rigorous imprisonment for a term which shall not be less than 6 months but which may extend to 7 years and with fine. In a case where tax evaded is less than Rs.25,000, he may be punishable with imprisonment for a term which shall not be less than 3 months, but which may extend to 2 years and with fine. However, a tax payer is not proceeded against if the tax payer files his return before the expiry of the assessment year or tax payable by such tax payer (not being a company) on the total income determined on regular assessment, as reduced by the advance tax and TDS, does not exceed Rs.3,000.
Earlier, the aforesaid threshold of Rs.3,000 was applicable to all taxpayers. However, the Finance Act, 2018 has, with effect from 1 April 2018, excluded company from the applicability of this threshold. Therefore, irrespective of tax amount, prosecution can be proceeded against a company, if the return is not filed before the expiry of the assessment year.
Time line for filing belated and revised return
Any person who has not filed a return by due date may file return at any time before the end of the relevant assessment year or before completion of assessment, whichever is earlier.
Earlier, if any person having filed return on or before due date discovers any omission or any wrong statement therein, he may furnish a revised return. Return could not be revised if original return is filed beyond due date. Now, even belated return can be revised at any time before the end of the relevant assessment year or completion of the assessment, whichever is earlier.
Conclusion
The government has introduced various measures to ensure that tax payers file return on or before due date. Not filing of return on or before due date has far reaching tax implications. Therefore, it is always advisable to file tax return on or before due date.
( Samir Shah is Senior Manager and Jason Sanctis is Deputy Manager, Deloitte Haskins and Sells LLP. The views expressed are strictly personal.)
