The deadline for filing the income tax return (ITR) for the 2021-22 fiscal year or the 2022-23 tax year is July 31, 2022. If you have already filed the return or succeed in filing it before the due date is fine. But what if you fail to file the ITR by the July 31 deadline?
If you miss the July 31 deadline, you can still file the return by December 31, 2022. However, you will have to pay a late fee. This will also have other financial consequences.
The late fee for taxpayers whose annual income is less than Rs 5 lakh is Rs 1,000. If your annual income is more than Rs 5 lakh, the late fine is Rs 5,000.
However, if your total gross income does not exceed the basic exemption limit, you will not be required to pay a late-filing penalty.
The basic exemption ceiling depends on the tax regime you choose. Under the old income tax regime, the basic tax exemption limit stands at Rs 2.5 lakh for taxpayers below 60 years of age. For people aged between 60 and 80, the basic exemption cap is set at Rs 3 lakh. For people over 80, the exemption limit is Rs 5 lakh.
Under the new concessional income tax scheme, the basic tax exemption limit stands at Rs 2.5 lakh irrespective of the age of taxpayers.
Total gross income means total income before taking into account the deductions provided for in sections 80C to 80U of the Income Tax Act.
Besides late fees, missing deadlines have several other implications. If you miss the deadline, you will be required to pay interest on late payment of taxes.
“There might be tax payable when filing an ITR, eg interest and dividends. TDS deducted at 10%, but you are in a 20% or 30% tax bracket, hence the differential amount of tax shall be paid with interest in accordance with Section 234 A at the rate of 1% per month,” said Sudhir Kaushik, co-founder and CEO of TaxSpanner.
If you file the return before the due date, you can simply file the overdue tax. However, if you miss the deadline, you will have to file the unpaid tax with interest, retroactively from July 31. If unpaid dues are paid after the 5th of any month, interest for the full month shall be paid at the rate of 1 percent per month.
A taxpayer can reduce his liability by offsetting losses from business transactions from the sale of goods with other income. However, losses can only be carried forward if the ITR is produced before the due date.
“Loss carry-forward (other than loss of home ownership), if any, is not permitted if you miss the due date. Losses on the sale of property/shares/fixed assets as these- those were forced to sell during corona must be reported and filed by the due date,” said Sudhir Kaushik, co-founder and CEO of TaxSpanner.
According to the Income Tax Act, business losses (other than speculative activities) can be deducted from any income except wage income. Any unadjusted loss may be carried forward for the eight fiscal years immediately following the current fiscal year and deducted from any business income, as prescribed. For example, business losses incurred in fiscal year 2020-21 can be deducted from business income in fiscal year 2021-22 and subsequent years.
You may receive a notice from the income tax service for non-declaration or mismatch.
Regarding the possibility of an opinion from the Income Tax Department, Kaushik said, “During the Covid pandemic, many people have invested in stocks, as we see when filing ITRs and AIS (Annual Information Statement) So tax notices for reported income/loss mismatches can also be expected.”
If the July 31 deadline is missed, the late tax return filing deadline for fiscal year 2021-22 is December 31, 2022.
In case you even miss the deadline of December 31, 2022, for refunds and losses, you would be required to file a petition for tolerance with your local income tax commissioner for refund and losses carried forward . “If the reason is in good faith, you can get permission,” Kaushik said.
There is a huge penalty if you owe taxes. “If you find additional income in the AIS or other documents that was not declared in the original declaration or was not filed at all, you must pay 50% additional tax on that pending tax amount if you file an updated return within one year and an additional 100% if you file after one but before two years,” he said.
If you miss the December 31 deadline, a new ITR U form must be used for the updated declaration and give the reasons for updating your income. Reasons could be: previously undeposited return; income is not declared correctly; bad revenue leaders chosen; reduction of losses carried forward; reduction of unabsorbed depreciation; reduction of tax credit u/s 115JB/115JC; bad tax rates and such.