This is the third extension since 31 March 2020, which was the original deadline for filing the belated return for FY18-19. In the wake of the covid-19 crisis, initially, it was revised till 30 June and later to 31 July.
This comes as a relief for taxpayers. But should you wait for the last date for filing return for FY18-19? Experts advise otherwise, especially to those people who have tax dues to be paid for FY18-19 and those who have to claim refunds from the tax department.
In the case of dues, the tax department will levy penalty interest for the period of delay, and hence, will increase your overall tax liability. If you have to claim refunds, the tax department will only start processing your refunds, once you file the return. Let’s understand how this works.
Penalties and interest
There are different types of penalties levied in case the return is filed after the due date. “The extension of the return filing deadline for FY2018-19 doesn’t provide any relief from late filing fees and interest," said Naveen Wadhwa, deputy general manager at Taxmann, a tax and accounting firm.
Penalty for late return filing
Under Section 234F, there is a fixed penalty for filing return after the due date or extended due date. Generally, 31 July of an assessment year is the due date for filing the tax return. A penalty of ₹5,000 is levied on returns filed after the due date but before December 31. After that, the penalty goes up to ₹10,000. For taxpayers with income of up to ₹5 lakh, the penalty is ₹1,000.
So, you will have to pay this penalty while filing FY2018-19 tax return even if you don’t have any tax due.
However, in case you have any unpaid tax amount, interest will be levied on the tax due for the period of delay since the due date or extended due date of filing of the tax return.
“The taxpayer will be liable for interest under Section 234A at 1% per month on the balance tax payable from 1 September 2019 (due date for filing tax return for FY2018-19 was extended 31 August) till the date of payment of tax. Interest under Section 234A is not applicable if there is no balance tax payable as on 31 August 2019," said Sonu Iyer, tax partner and people advisory services leader, EY India.
Default or Delay in advance tax payment
Those who are liable to pay advance tax will have to pay penalty interest for the delay in paying advance tax.
“Any taxpayer whose total tax liability (net of tax deducted at source) on the estimated income is likely to be ₹10,000 or more during the relevant financial year (FY), then she is required to pay such tax by way of prescribed advance tax instalments during the FY itself," said Parizad Sirwalla, partner and head, global mobility services, tax, KPMG India.
Salaried people don’t have to worry about the advance tax liability as it is taken care of by the employer by deducting TDS (tax deducted at source). However, if a salaried person has other income through rent or interest, which she hasn’t disclosed to the employer, she may have to pay interest on the advance tax liability on such income if the tax liability on the same exceeds ₹10,000.
“The taxpayer will be liable for interest under Section 234B and 234C for default in payment of advance tax," said Iyer.
“Interest under Section 234B is levied if the taxpayer has not deposited advance tax at all or if the advance tax deposited is less than 90% of the total tax liability. The taxpayer will be liable for interest under Section 234B at 1% per month or part of the month from April 2019 till the date of payment of tax," said Iyer.
Advance tax is paid in fixed installments as a percentage of total estimated tax liability on a quarterly basis. Interest under Section 234C is levied if the advance tax paid in any instalment is less than the prescribed limit.
For senior citizens (aged 60 and above), who don’t have any business income, Sections 234B and C are not applicable as they don’t have to pay advance tax.
In case you wait for the last date to file your tax return, refunds will also be delayed as the tax department will only start processing the refunds after you have filed the tax return. Normally, refunds are processed in around a month’s time after the processing of income tax return is complete. The tax department pays interest on refunds from the date of filing of return in case of late returns, so more you delay, you will also lose on the interest on the refund if there is any.