Section 139(1) of the Income Tax Act, 1961 specifies the time limit of filing the return for any individual whose total income exceeds a specified income threshold.
The due date for filing the tax return for individuals is 31st July except for individuals who are engaged in business or profession and whose accounts are required to be audited as per the prescribed provisions of the Act; for them the due date is 30th September.
Tax returns filed after the specified due date are considered as belated tax returns which could be filed within two years from the end of the relevant financial year under section 139(4) of the Act. After that it becomes time-barred, that is, cannot be filed. Further, penalty is not levied if the tax return is filed within one year from the end of the relevant FY. For example Belated Tax Return for the financial year ending 31st March, 2013 can be filed upto 31st March, 2015 but to avoid penalty the same should be filed by 31st March, 2014.
However, belated tax returns suffer some limitations and penalties:
Revision of ITR is Not Possible:
A belated return cannot be revised, unlike a return filed within the original time limit, which can be revised within a specified period.
For example, where you intend to claim a foreign tax credit/relief under the tax treaty based on a foreign tax return and information of the same is received after the due date or you discover any omission or misstatement in the original tax return filed. In such cases, you can revise your tax return within two years from the end of the relevant financial year or before completion of your assessment by the tax officer, whichever is earlier, if the tax return is filed within the due date.
Carry Forward of Losses:
Following type of losses cannot be carried forward if file return after due date
- Speculation loss
- business loss excluding loss due to unabsorbed depreciation and capital exp on scientific research
- short term capital loss
- long term capital loss
- Loss due to owning and maintenance of horse races
However there is no impact on following type of losses even if return is furnished after the due date
- Loss from house property
- Business loss on account of unabsorbed depreciation and capital expenditure on scientific research.
(Though delay can be condoned as per circular 8/2001 DT 16.5.2001 on fulfilling of certain condition).
Interest on Outstanding Taxes:
If any tax remains outstanding after deducting advance tax, TDS and self assessment tax than interest will be applicable @1% per month and part thereof up to the date of filing of the return besides interest applicable u/s 234B or 234C. Means this interest is applicable only if there is any tax payable in your return.
This is in addition to the 1% per month interest for non-payment of advance tax, that is, tax due after tax deduction at source exceeding Rs 10,000. Thus, late returns can result in an additional interest burden.
Penalty on Filing Return after due date:
There is a discretionary penalty of Rs 5,000 under section 271F if the return is not filed within a year from the end of the tax year. For example, there will be no penalty if the return of income for financial year ended 31 March 2013 is filed by 31 March 2014. If it is filed after that, the tax officer can levy this penalty.
However, tax experts say that this provision is rarely exercised by the assessing officer. “When there is an additional tax liability (in addition to what is deducted at source), then penal interest is payable under Section 234A on delayed filing of tax return,” says Vaibhav Sankla.
Delay in Refund or Loss of Interest on Refund:
You are eligible to get tax refunds irrespective of the date of filing the tax return. In general, the earlier you file the return, the earlier you receive the refund. Late filing of return delays refund. Further, interest on refund u/s 244, wherever applicable, is also reduced to an extent if the return is filed late.
Procedure for filing belated returns
There is no difference in the procedure for filing ITR before or after the deadline. “The procedure to file a return remains the same irrespective of the time of filing. However, an individual should mention that the return is a belated return,” says Vineet Agarwal. While filing the ITR, select the return filed section code as “12” in the tax return form. This is applicable for both online as well as offline filing of tax return.
Persons who can afford to file late return
If you have
- already deposited due tax or due taxes has been deducted by your employer and nothing is due or
- you are not claiming a Major amount as refund or
- you have no losses to be carried forward
Persons who should file return on time
If you have
- balance tax to be deposited or short fall of tax or
- huge amount of refund due to you or
- you have losses to be carried forwarded as explained above
But one should not wait until the last moment. There is a possibility that certain material aspects may get skipped due to the last-hour rush. In case you are filing returns online, a technical error or failure may also crop up.
Hence, once the tax year is over, it is always better to start collating documents and ascertain whether any tax is still payable or any loss is to be carried forward. In any case, it is better to file the return at the earliest.