An income tax return (ITR) is an annual declaration furnished by the taxpayer with respect to the income earned and taxes paid during the relevant financial year. Such a declaration is required to be made within the statutory timelines set out by the tax authorities. In India, individual taxpayers not subject to audit of their financial statements are under an obligation to file their ITRs by 31 July.
For FY2017-18, the due date to file ITRs was 31 July, which was extended by the government to 31 August.
Few taxpayers may have missed the extended due date for some reason or the other and may be wondering on the next course of action.
Thankfully, the Indian tax laws provide a mechanism to file the ITRs even after the due date.
Filing ‘belated’ ITR
Filing a ‘belated ITR’ is the most common solution in order to remedy the failure to furnish an ITR within due date(s). Indian tax laws allow a taxpayer to file a belated ITR either by the end of relevant assessment year (AY) or before the completion of revenue audit by the tax authorities, whichever is earlier. The AY relevant to the FY2017-18 shall be the period from 1 April 2018 to 31 March 2019. Therefore, a belated ITR for FY2017-18 can be filed on or before 31 March 2019, unless a tax assessment is completed before this date.
While the tax laws allow filing of a belated ITR, there are important implications that a taxpayer should be aware of. The same has been discussed in detail in the subsequent paragraphs.
Filing a belated ITR: implications
Clearly, a taxpayer has to pay some price for not furnishing the ITR within due date. This could be in the shape of a monetary penalty(ies) and/or losing some benefits.
With effect from FY2017-18 (AY 2018-19), if a taxpayer fails to file his/her ITR within the due date, a mandatory fee of ₹ 5,000 is levied where the belated ITR is filed up to 31 December and a fee of ₹ 10,000 is levied if the belated ITR is filed after 31 December but within 31 March. However, if the income is below ₹ 500,000, the fees are capped at ₹ 1,000.
Another implication of not filing the ITR within statutory timelines could be in the way of an additional interest levied @1% per month on the amount of unpaid tax liability. However, it is important to note that if there is no tax payable, then such interest would not be levied even if an ITR is filed after the due date.
Also, filing a belated ITR may result in a delay in processing of any tax refund(s) claimed by the taxpayer.
Another important consequence of not filing the ITR within the due date is that the taxpayer shall not have the option to carry forward any loss arising under different heads of income (except in case of loss from ‘house property’). This could have an adverse effect on the tax outflow of subsequent years as the losses cannot be set-off against any gains in future years.
In a worst-case scenario, a taxpayer who willfully fails to furnish his/her ITR within the due date may also be liable to a fine and/or imprisonment, depending upon the degree of delay and the amount of unpaid taxes involved.
Keeping the above implications in mind, it is thus always recommended to file the ITR within statutory timelines and act as a tax-compliant citizen.
Is it possible to revise a belated ITR?
According to the relevant amendments introduced by the Finance Act, 2016, a belated ITR can be revised before the end of relevant AY or completion of assessment, whichever is earlier.
Is there any alternative mechanism available to claim refund and carry forward losses, if the return filing deadlines have been missed?
To avoid genuine hardship to taxpayers, the tax laws provide powers to the Central Board of Direct Taxes (CBDT) to authorize income tax officers to admit an application or claim related to any deduction/ exemption/refund/any other relief, even after the expiry of the period specified under the Act. Pursuant to such powers, CBDT had issued an administrative circular in 2015 wherein the power to condone delay in filing returns claiming refund or carry forward of any losses (or set-off) was delegated to various income-tax authorities on the basis of quantum of sum involved.
Accordingly, a return claiming refund/carry forward/set-off of losses may be accepted even after expiry of prescribed timelines, provided the application is made to this effect within six years from the end of the relevant AY. As per the circular, such an application will be examined for acceptance/rejection by the relevant authority basis the following parameters:
(i) The claim is correct and genuine
(ii) The case is based on genuine hardship on merits
(iii) Income is not assessable in the hands of any other person under the Income-Tax Act
(iv) The refund has arisen as a result of excess tax deducted or tax collected at source, advance tax or self-assessment tax.
Such application is required to be disposed of by the concerned tax authority within six months from the end of the month in which the application is received.
Which ITR form is to be used while filing a belated ITR?
The ITR form notified for and applicable to the taxpayer for the relevant FY shall be used for filing the belated ITR also. There is no separate form prescribed for this purpose. The taxpayer would need to select the option for ‘belated ITR’ in the form itself. For example, for filing a belated ITR for FY2017-18, the relevant ITR form notified for FY2017-18 only should be downloaded from the income tax portal for filing the belated ITR.
Vikas Vasal is national leader tax–Grant Thornton India LLP
Akhil Chandna and Ajay Arora contributed to this article.
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