How to file your tax returns if you have missed the 5 Aug deadline

There are options for those who haven't filed their returns on time. The IT department gives up to two financial years as grace period.

hidden August 07, 2013 17:37:16 IST
How to file your tax returns if you have missed the 5 Aug deadline

By Anil Rego

It is that time of the year when filing of tax returns is on top of everybody's mind. The Central Board of Direct Taxes (CBDT) has from the current year made it mandatory for individual salaried income tax payers to file their returns online if their income exceeds Rs 5 lakh per annum. The deadline for filing taxes for salaried people had been extended to 5 August, and the major concession for e-filing for this category of tax payers is that there is no need to get a digital signature. One needs to file their taxes online and should sign and send the verification form to the Central Processing Unit in Bangalore.

Those earning less than Rs 5 lakh a year from salary and having less than Rs 10,000 per annum as interest on deposits and bank accounts will be exempt from filing taxes. However, this comes with certain conditions, such as their employer has made the mandatory TDS payments to the government, and one has remained in the same job through the financial year. If one is liable to file taxes (even if not to pay them) and has not filed them in time, there is a penal interest of 1 percent per month charged, hence it is better to ensure early payment and filing of taxes.

But, what happens if one does not file their returns on time? Is there a method to sort out the issue of late or non-filing?

How to file your tax returns if you have missed the 5 Aug deadline

The IT department gives up to two financial years as grace period (with the second financial year carrying a Rs 5,000 fine).

There are actually quite a few options for those who have not filed their returns on time, or for those who have not filed returns for the previous years. Ideally it is possible to avoid paying any penalty to the government if one does not owe any taxes, as late filing (not late payment) does not incur any penal payments. One is permitted to file returns up to a maximum of 2 financial years from the year of the return, i.e. if the returns for 2010-11 are not filed, one has time till March 2013 to file the returns.

There are certain clauses attached to the delayed filing. Capital losses cannot be carried forward unless they are filed in the tax returns before 31 July. Also, revised returns are not permitted, meaning any mistakes in the filing can be taken as a tax offense. The only capital loss that is permitted to be carried forward despite late filing of returns is loss on sale of house/ property.

However, there is a discretionary penalty of Rs 5,000 if the tax return is filed more than one financial year after the assessment year, i.e. if the returns for 2010-11 are filed in 2012-13 then a fine of Rs 5,000 is applicable, but if the same returns are filed by 2011-12 there are no fines. This fine of Rs 5,000 is at the discretion of the assessing officer.

There are other financial implications such as the penal interest of 1 percent per month (calculated on simple interest basis) that is levied on any tax that is due and not paid by the due date, this will be in addition to the 1 percent per month interest on non-payment of advance tax (for amount due after calculating TDS, amounting to over Rs 10,000).

For example, if an individual has a net tax payable of Rs 2,00,000 and has paid Rs 1,60,000 through TDS and Rs 30,000 as advance tax then the outstanding amount is Rs 10,000. For this outstanding amount of Rs 10,000, he will have to pay a penalty of Rs 100/- which is 1 percent of that amount for each month delayed beyond 31 July in case the return is filed by 31 March 2014. Thus the net tax payable if paid in October 2013, will be Rs 10,000 + 3 percent of Rs 10,000, which is Rs 10,300. However, if the same return is filed after 31 March 2014 in the month of April 2014, then there will be an additional penalty of Rs 5,000 (as applicable in the previous case) making the total amount payable as Rs 10,000 + Rs 5000 + 9% of Rs 10,000, which is Rs 15,900. These provisions for late filing and additional penalty clauses are detailed in the section 234 of the IT Act.

One can, however, claim for a tax refund even if the returns are filed late. But this will result in the refund being delayed and receipt of the refund could take a very long time.

Apart from this, there are other practical aspects that mandate that IT returns should be filed on time, such as requirement of IT papers for bank accounts, visas, bank loans, etc. Hence, it is always advisable to ensure that one's returns are filed well within time to avoid unnecessary hassles and penalty payments.

Summary:

• There are options for those who haven't filed their returns on time. The IT department gives up to two financial years as grace period (with the second financial year carrying a Rs 5,000 fine).

• An interest of 1 percent per month (calculated on simple interest basis) that is levied on any tax that is due and not paid by the due date.

• Capital losses cannot be carried forward unless they are filed in the tax returns before 31 July.

The author is CEO & Founder, Right Horizons, an investment advisory firm.

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