Penalties for Late Filing of Income Tax Returns

The last date for filing income tax returns (ITR) is July 31, 2019. Unlike previous years, this time the income tax (IT) department may not extend the deadline as strict compliance rules are in force. For taxpayers, this is the right time to sit up and start putting in place documents required in filing ITR. Before starting the tax filing process, a big chunk of taxpayers waits till they get Form 16 and then start collecting requisite documents that play key role in the return filing. This leads to delay in filing ITR.

Hence, it is advised that by this time you should have got hold of proof of monthly insurance premium you have been paying throughout the last financial year. Ensure that you have with you the monthly or quarterly rent receipts from your landlord. Also, if you haven’t got proof of school fee you have paid for your kid, then rush to collect it.

Note that you can get tax exemption on school tuition fee for up to two kids. Also see that you have fully used the Rs 1.5 lakh tax exemption facility granted under Section 80C of the Income Tax Act, 1961. You can claim tax exemptions under Section 80C to 80U. All the above-mentioned documents help you file ITR before the deadline and make the entire process hassle-free.

But what if you miss the deadline and file your ITR after the last date of July 31, 2019? The answer is simple: you will have to pay penalty and the penalty amount varies depending on how late you file the ITR.

Penalty for late ITR filing

In 2017, the I-T department took a slew of measures to promote tax compliance among taxpayers. Introduction of Section 234F which makes provision for penalty for late filing of ITR was one of these steps. Chartered Accountant Rahul Singh, who is manager at Taxmann.com, says Section 234F was introduced to inculcate among taxpayers the habit of filing of ITR on time. He adds if the taxpayers file return in time then it would be easy for the Income Tax Department to identify the non-filers. “This will enable the I-T department to issue notices in time,” he said.

As per the memorandum explaining the Finance Bill 2017, the late filing fee was introduced in view of the “non-intrusive information-driven” approach of improving tax compliance and effective utilisation of information in tax administration by the I-T department. The “non-intrusive information-driven” approach means increasing tax compliance by incorporating minimum efforts, Singh added.

Besides, increasing the number of tax filers and tax revenue was another motive the government targeted. Archit Gupta, Founder and CEO, ClearTax, says as per newly introduced section 234F of the Income tax Act, 1961 which came into effect from April 1, 2017, filing ITR post the due date, can make you liable to pay penalty.

“This new section is applicable for returns filed for FY2017-18 or AY2018-19 and onwards,” he said.

The penalty amounts vary depending upon the type of violations of rules. For example, say if you file post due date which is July 31, 2019 but before December 31, 2019, you will have to pay a penalty of Rs 5,000. And for returns filed after December 31, penalty limit will be increased to Rs 10,000.

“However, as a relief to small taxpayers: if total income is not more than Rs 5 lakh, the maximum penalty levied will only be Rs 1,000,” Gupta said.

Remember that income tax return for a particular financial year cannot be filed beyond the end of the assessment year. This means you cannot file ITR for FY19 after March 31, 2020. Also, you will not have to pay any penalty if your annual gross income does not exceed basic exemption limit of Rs 2.5 lakh, even if you file late ITR.