Consequences of Filing a Belated Return
Filing an income tax return (ITR) on time is crucial to avoid penalties and legal complications. However, if a taxpayer misses the original deadline, they still have the option to file a belated return. While this allows them to comply with tax regulations, it comes with several financial and procedural consequences.
A belated return attracts late fees, interest penalties, and loss of tax benefits, making it an expensive delay. In certain cases, it may also lead to scrutiny by the Income Tax Department. Understanding these consequences can help taxpayers make informed decisions and avoid unnecessary liabilities.
Table of Content
What is a Belated Return?
A belated return refers to an income tax return that is filed after the original due date but before the final deadline specified under the Income Tax Act, 1961. It allows taxpayers to fulfill their tax obligations even after missing the primary deadline, but with certain financial and legal repercussions.
Definition under Section 139(4) of the Income Tax Act
As per Section 139(4) of the Income Tax Act, if a taxpayer fails to file their ITR within the prescribed due date (typically July 31 for most individuals), they can still file it later as a belated return.
However, this must be done before the end of the relevant assessment year or before any notice from the tax authorities, whichever is earlier.
For instance, for the financial year 2023-24 (assessment year 2024-25), the belated return can be filed up to December 31, 2024.
Deadline for Filing a Belated Return
The due date for filing a belated return is December 31 of the assessment year unless extended by the government. This means:
If the original deadline for filing an ITR was July 31, 2024, the belated return deadline would be December 31, 2024.
If a taxpayer misses the belated deadline, they will not be able to file an ITR voluntarily for that financial year. In such cases, any tax dues or penalties may be assessed by the Income Tax Department.
Penalties and Late Fees for Filing a Belated Return
Filing a belated return comes with financial consequences, primarily in the form of late fees under Section 234F and interest penalties under Section 234A.
Late Filing Fees under Section 234F
As per Section 234F of the Income Tax Act, taxpayers who file their return after the due date are subject to a late filing fee, which depends on their total taxable income:
Taxable Income | Late Filing Fee |
More than ₹5 lakh | ₹5,000 |
Up to ₹5 lakh | ₹1,000 |
Below the basic exemption limit (₹3 lakh for individuals below 60) | No late fee |
Key Points:
The penalty is charged per financial year, not per month.
If a taxpayer’s income does not exceed the basic exemption limit, they are not required to pay any late filing fees.
Interest Penalty under Section 234A
Apart from the late filing fee, taxpayers may also have to pay interest under Section 234A for any unpaid tax liability.
Interest Rate: Simple interest at 1% per month or part of a month on the outstanding tax amount.
Calculation Period: Interest is charged from the original due date (July 31) until the date of actual filing.
Applicability: If the taxpayer has already paid their total tax liability via TDS or advance tax, no interest under Section 234A will be levied.
Example Calculation: If a taxpayer has an outstanding tax liability of ₹50,000 and files their belated return on December 15, 2024, the interest under Section 234A would be:
Period of delay: 5 months (from August to December)
Interest charged: 1% per month on ₹50,000
Total interest: ₹50,000 × 1% × 5 = ₹2,500
Thus, in addition to the late filing fee under Section 234F, the taxpayer would have to pay ₹2,500 as interest on their outstanding tax liability.
Loss of Tax Benefits and Deductions
Filing an income tax return after the due date comes with financial drawbacks beyond penalties. One of the biggest disadvantages is the loss of key tax benefits and deductions, which can significantly impact the taxpayer’s financial position.
Disallowed Deductions Under Various Sections
Certain deductions under the Income Tax Act are only available if the return is filed on time. Filing a belated return can lead to the disallowance of these benefits, increasing the taxable income. Some important sections where deductions may be denied include:
Section 80-IA, 80-IB, and 80-IC: Deductions related to profits from infrastructure projects, small-scale industries, and certain businesses may not be available.
Section 10A and 10B: Taxpayers operating in Special Economic Zones (SEZs) or export-oriented businesses might lose their tax exemptions.
Other Chapter VI-A Deductions: Benefits under Sections 80P (cooperative societies), 80JJA (employment-related deductions), and 80QQB (royalty income for authors) may also be forfeited.
Ineligibility to Carry Forward Business and Capital Losses
Taxpayers who report business or capital losses in a financial year can carry them forward to offset against future profits, reducing taxable income in subsequent years. However, filing a belated return comes with a major limitation:
Business Losses (Section 72 & 73): If a taxpayer incurs business losses, they can be carried forward for up to 8 years. However, this benefit is only available if the return is filed on time.
Capital Losses (Section 74): Losses from the sale of shares, mutual funds, real estate, or other assets cannot be carried forward unless the return is filed before the deadline.
Exception for House Property Losses (Section 71B): The only loss that can still be carried forward even if the return is belated is a loss from house property, which can be carried forward for up to 8 years.
Taxpayers relying on loss carry-forwards as a tax planning strategy should ensure timely filing to avoid these restrictions.
Impact on Tax Refunds
Filing an income tax return after the deadline can also impact refunds that a taxpayer is eligible for, reducing potential financial benefits.
Loss of Interest on Refund Due to Delay
When taxpayers overpay their taxes through TDS (Tax Deducted at Source) or advance tax payments, they are entitled to claim a refund. The Income Tax Department pays interest on refunds under Section 244A, but this interest is calculated based on the date the return is filed.
Early filers get interest from April 1 of the assessment year: If a taxpayer files the return on time, the interest on refunds is calculated from April 1 of the following financial year until the refund is processed.
Late filers lose the interest for the delayed period: If a belated return is filed, interest is only calculated from the date of filing, meaning taxpayers lose out on months of interest that they would have otherwise received.
For taxpayers expecting a significant refund, a delayed return can translate into a direct financial loss due to the loss of interest income.
Legal Consequences of Late Filing
Filing income tax returns late isn’t just about financial penalties; it can also lead to legal consequences, including scrutiny from the tax authorities and even prosecution in extreme cases.
Possible Penalties and Scrutiny from the Income Tax Department
Higher chances of receiving tax notices: The Income Tax Department actively tracks non-filers and late filers. If the return is filed after the due date, there is an increased likelihood of receiving a notice for further scrutiny.
Increased risk of reassessment: Taxpayers filing belated returns may be subject to reassessment if the department suspects discrepancies or unreported income.
Difficulty in obtaining loans: Many financial institutions require income tax returns as proof of income when processing loan applications. Filing late may cause delays or issues in obtaining loans or credit approvals.
Risk of Prosecution in Severe Cases
In extreme cases, the Income Tax Department can take legal action against taxpayers who fail to file their returns for multiple years or intentionally evade taxes.
Imprisonment under Section 276CC: If a taxpayer wilfully fails to file a return and owes more than ₹25 lakh in taxes, imprisonment for up to 7 years may be imposed.
Fines and additional penalties: Even for lower tax dues, penalties and fines can be levied for persistent non-compliance.
While prosecution is typically reserved for cases of deliberate tax evasion, repeated late filings can attract more scrutiny and potential legal consequences.
Missed Opportunities Due to Late Filing
Filing an income tax return after the due date not only results in penalties but also leads to missed financial opportunities that could impact your tax liability and future savings.
Loss of Chance to Claim Refunds
If you are eligible for a tax refund, delaying your ITR filing could mean a delay in receiving your refund. Additionally, the interest on the refund, which is calculated from the date of filing, will be reduced since the refund processing starts only after submission. In some cases, the refund amount might be entirely forfeited if the return is not filed within the final belated return deadline.
Inability to Claim Certain Losses for Future Tax Benefits
One of the significant drawbacks of filing a belated return is the restriction on carrying forward certain losses. According to the Income Tax Act, business losses and capital losses can only be carried forward if the return is filed on time. However, house property losses are an exception and can still be carried forward even if the return is filed late. By missing the deadline, taxpayers lose out on the ability to offset these losses against future gains, leading to higher taxable income in subsequent years.
Impact on Tax Regime Selection
The tax regime under which you file your return can significantly affect your overall tax liability. Filing a belated return can limit your choices and push you into an unintended tax regime.
Automatic Shift to the New Tax Regime for FY 2023-24
For FY 2023-24, the new tax regime is the default option unless a taxpayer explicitly opts for the old regime while filing their return. If a belated return is filed, taxpayers lose the choice of opting for the old tax regime, as the belated filing option does not allow such a switch. This can result in a higher tax liability if deductions and exemptions under the old regime would have led to lower taxable income.
Loss of Deductions Available Under the Old Regime
Under the old tax regime, taxpayers could claim deductions under Section 80C, 80D, HRA, standard deduction, and various exemptions. However, the new regime has limited deductions and a lower number of exemptions. Since belated return filers are automatically placed under the new tax regime, they cannot avail of these deductions, leading to higher taxes. This can be particularly disadvantageous for individuals who have significant tax-saving investments, home loan benefits, or other deductible expenses.
How to File a Belated Return?
Even if you missed the original deadline, filing a belated return is still possible through the official income tax portal. Here's how you can do it:
Step-by-Step Process for Filing a Belated Return
Visit the Income Tax e-Filing Portal
Go to the official website of the Income Tax Department: www.incometax.gov.in.
Log in to Your Account
Use your PAN/Aadhaar and password to log in. If you’re a new user, register first.
Select ‘File Income Tax Return’
Under the ‘e-File’ menu, select ‘Income Tax Return’ and choose the applicable assessment year.
Choose the Correct ITR Form
Select the appropriate form (ITR-1, ITR-2, etc.) based on your income sources.
Enter Income, Deductions, and Tax Details
Provide details of your income, exemptions, and deductions as per your documents (Form 16, investment proofs, etc.).
Select ‘Belated Return’ Under Section 139(4)
When prompted, specify that you are filing a belated return under Section 139(4).
Calculate and Pay Any Pending Tax
The system will compute the tax liability, including any penalties and interest. Pay the dues via net banking, debit card, or challan.
Submit the Return
Once all details are filled in, review the form carefully and click ‘Submit’.
Verification Methods for Submitting the Return
After submission, verification is required to complete the process. This can be done using:
Aadhaar OTP: An OTP is sent to your registered mobile number linked to Aadhaar.
Net Banking: Verify through your bank's net banking portal.
Electronic Verification Code (EVC): Use an EVC generated via your pre-validated bank or demat account.
Digital Signature Certificate (DSC): Mainly used by companies and professionals.
Physical Submission: If none of the electronic methods are feasible, download and sign the ITR-V form and send it via post to the Income Tax Department's CPC office in Bengaluru.
Once verified, the belated return is processed, and if eligible, refunds will be credited accordingly.
Conclusion
Filing a belated income tax return might seem like a convenient option after missing the original deadline, but it comes with significant consequences. From penalties and interest charges to the loss of deductions and refund delays, late filing can impact both your tax liability and financial planning. Additionally, repeated non-compliance may attract legal scrutiny and, in extreme cases, prosecution. To avoid these complications, it’s always best to file your return on time. If you have missed the deadline, filing a belated return at the earliest can help minimize penalties and financial setbacks.
FAQs
1. What is the last date for filing a belated return for the current assessment year?
The last date for filing a belated return is December 31 of the assessment year. For instance, for the financial year 2023-24, the belated return must be filed by December 31, 2024. If you miss this deadline, you will not be able to file your return unless permitted under special circumstances by the Income Tax Department.
2. How much penalty is applicable for filing a belated return?
A late filing fee under Section 234F applies as follows:
₹5,000 if taxable income exceeds ₹5 lakh.
₹1,000 if taxable income is below ₹5 lakh.
No penalty if total income is below the basic exemption limit (₹3 lakh for individuals under 60 years).
3. Can I carry forward losses if I file a belated return?
No, if you file a belated return, you cannot carry forward business and capital losses to future years. The only exception is losses from house property, which can still be carried forward even with a belated return.
4. Will I still get a refund if I file my return late?
Yes, you can still receive a refund for excess taxes paid. However, you may lose out on interest on the refund amount, as interest is calculated from the date of filing rather than the end of the financial year.
5. How does interest under Section 234A apply to late returns?
If you have outstanding tax liability, Section 234A imposes an interest charge of 1% per month or part thereof on the unpaid tax from the original due date (typically July 31) until the date of actual filing.
6. Can I revise a belated return after filing?
Yes, a belated return can be revised, but only until December 31 of the same assessment year. After this deadline, no modifications or corrections can be made.
7. What happens if I fail to file my return even after the belated deadline?
If you do not file your return by December 31, you will be unable to file it unless the tax department issues a special extension. Additionally, you may face:
Penalties and fines.
Interest on unpaid taxes.
Prosecution for willful default, which could lead to imprisonment in extreme cases.
8. How does late filing affect salaried employees?
Salaried employees who file a belated return may face:
Loss of refund-related interest.
Disqualification from carrying forward certain deductions.
Difficulty in availing financial benefits like loans, as tax returns act as proof of income.
9. Is prosecution a possibility for failing to file income tax returns?
Yes, under Section 276CC, if tax due exceeds ₹25 lakh, non-filing of returns can lead to imprisonment of six months to seven years. For lower tax amounts, the imprisonment term ranges from three months to two years, along with fines.
10. How can I check if my belated return has been processed?
You can check the status of your belated return by:
Logging into the Income Tax e-filing portal.
Navigating to the "My Account" section and selecting "View Returns/Forms."
Checking the return status under "ITR Processing Status."
11. Does filing a belated return impact future tax assessments?
Yes, frequent late filings may increase the chances of your return being flagged for scrutiny by the Income Tax Department. It can also affect credit scores and financial credibility for loan approvals.
12. What are the available methods to verify a belated return?
A belated return must be verified using one of the following methods:
Aadhaar OTP verification.
Net banking e-verification.
Bank account/Demat account-based verification.
Sending a signed physical copy of ITR-V to the CPC office in Bangalore.
Related Posts
See AllOpening a bank account is an essential step in managing your finances. In India, it requires submitting specific documents to comply with...
The GST credit that the taxpayer receives when they buy goods and services to manufacture or sell is known as the Input Tax Credit (ITC)...
Filing income tax returns (ITR) on time is a crucial responsibility for every taxpayer. However, if you have missed the original...
תגובות