In India, for FY 2014-15 (i.e. Assessment Year 2015-16), filing of Income Tax Return (ITR) is due. In general, the Due Date of filing is July 31, 2015 for non-audit-business assesses, and Sept 30, 2015 for audited-business-assessees. Therefore, in most of the cases, generally, July 31 (i.e. presently July 31, 2015) is relevant due date (generally for mostly Individuals). Hence, it is high time and important for all individuals to get ready with all information & documents for the preparation of an Income Tax Return. Some people (for various reasons) donot pay much attention for filing of ITR before the due date. Here, it is important to understand that why the ITR must be filed before the due date.
Here are certain useful & relevant points, which show the importance of filing of ITR by the due date and must be considered for the purposes of filing of ITR before the Due Date:
- Levy of Interest Penalty: The very first impact of not filing of ITR by due date is that a Penal Interest @ 1% gets attracted (u/s 234A of the Income Tax Act, 1961 "Act")). This penal interest is charged on Tax Liability Payable, and is charged in addition to normal interest of section 234B of the Act. Hence, non-filing of an ITR, by Due Date, will lead to double interest i.e. one, a normal interest u/s 234B and two, a penalty interest for non-filing of ITR by Due Date. Any person, once misses the due date, awakes very late (i.e. after receiving an IT Deptt Letter or Arising of a need for Loan/Visa/Otherwise) and till that date a big amount of interest gets accrued, which become a burden for assessee at that stage.
- Levy of Penalty for Rs 5,000: U/s 271F of the Act, if ITR is not filed till the end of relevant assessment year then a penalty of Rs 5,000 may be levied by the concerned assessing officer on the assessee.
- ITR Cannot Be Revised: Post-filing of ITR, if one realizes some mistake in the filed ITR then there is an option to correct the mistake by filing a Revised Return. However, if someone does not file the ITR by due date and files the ITR late (i.e. after due date of ITR) then he/she loses the option to revise the ITR. Hence, in nutshell, if someone finds occur a mistake in ITR and file the ITR late then that mistake cannot be corrected, and the same may lead to lots of inconvenience & hassles to the assessee. Here it is very important to understand that this Revision of ITR window is very crucial & important. There are numerous reasons (and some are beyond control of assesse) when Revision of ITR is very much needed. However, due to non-filing of ITR by Due Date, the option is not available. Hence, all assesses (NRIs, Expatriates, Indian Citizens, Indian Residents, Business Assessee, Non-Business Assessee, Taxable ITR, Non-Taxable ITR) need to keep this importance in their mind and file the ITR by the Due Date.
- Late ITR Late Refund: If ITR is filed with delay then the ITR will get processed also with delay and the same will lead to late processing of ITR in Refund cases. Hence, assesse will face delay in getting the refund back from the IT Deptt. Here, it is important to understand that most of the assesses (who file their ITR by due date) are used to file their ITR in last 10 days before Due Date. However, if the ITR is filed much before the due date (i.e. 1-2 months before) then the processing of those ITRs will be done first and refund processing shall also happen accordingly on FIFO basis. Hence, in addition to filing ITR by Due Date, filing well before Due Date is important for hereby mentioned reason.
- Chances of Income Tax Notice as well Scrutiny Notice: In today scenario, through various sources IT Deptt is aware of assessees major financial transactions, property transactions, bank deposits, credit card transactions etc. Also, if any income is earned by assessee, the IT deptt is aware of those transactions through TDS records (i.e 26AS). In these kind of situations, if assesse does not file the ITR by due date and thereafter, the same may lead to some Income Tax Notice from the IT Department (through IT Deptt Compliance Cell or otherwise) and in some cases to Income Tax Scrutiny Notice as well.
- Reminders From Income Tax Department: Now, the IT Deptt have full records of assesses. If an ITR is not filed by due date, IT Deptt starts sending communications via emails, sms etc. These communications trouble the assesse. Also, in IT Deptt records, assesse information gets place in defaulter/non-compliant assesse. Hence, for these reasons also, it is very important to comply the Tax Rules (specifically for filing ITR before Due Date).
- Carry Forward of Losses Not Allowed: If assesse has incurred some losses during the year (business loss, loss on sale of shares/mutual funds etc) then as per the provisions of the Act same can be carried forward to next years to set off against future year profits. However, if the assesse files the ITR late (ie after due date) then assesse loses the right of carry forward of losses. Hence, in nutshell, for losses ITR, one should be very cautious to file ITR wrt filing of same by due date. Here, it is important to understand that in loss cases, assesse thinks that there is no tax payable, hence, ITR lapses for filing by Due Date, which become a bottleneck in carry forward of losses and the losses lapses.
- Importance of Tax Return: ITR is a very important legal document and is very helpful before various authorities and at various places e.g. for VISA purposes, Loan purposes etc. Even in various proceedings in the Income Tax Department, filing of ITR (by Due Date) provides lots of strengths to assesses representations.
- Prosecution: As per the new provisions of Income Tax Law, intentionally non-filing of ITR (by due date) can lead to initiating of prosecution provisions by the the Tax Authorities.
- Foreign Assets: As per the latest Budget (passed by Loksabha & RajyaSabha) i.e. Finance Act 2015, it is proposed that all Resident Assessees, who have foreign assets or financial interest, are compulsorily required to file their ITR whether they have taxable income or not. Here, even in honest assesse cases, through filing of ITR the due needful can be taken care by them, which will avoid unnecessary hassles to them by the Investigation Deptt of Income Tax Office.
- Black Money Act: Now, with the passage of Black Money Bill (in relation to foreign undisclosed assets and income) it is very pertinent for Resident Assessees, who have foreign sources of assets and/or income, to file an ITR and take needful timely decisions in relation to disclosure so that harshest penal provisions of this new Act can be minimized or avoided or taken care of.
Here, it is important to understand that though as per the provisions of the Act, one has time of two years to file belated returns. For instance, for FY 2014-15, belated returns can be filed till March 31, 2017. However, this should not be considered a tool to sit back and relax as the same may lead to various penal provisions & inconveniences. In the current era, where various new information technologies have been launched by the Tax Department, delay in ITR filing will automatically lead to triggering of various trouble-raising mechanism by the Department. Also, in the light of insertion of new laws (e.g. Black Money Act), ITR filing (By Due Date) is very very important.
Also, it is found that once the ITR is not filed by Due Date, assesse even lapses the maximum time available for filing an ITR, and in that case non-filing of ITR leads to non-repairable losses to assesses.
It is also very important to understand that ITR should not only be filed by Due Date but should be filed well before Due Date so that last hours inconveniences can be avoided and benefits of early filing are gained.
This article is useful and relevant for all ITR filers in India i.e NRIs, Expatriates and Other ITR Filers. It also clarifies various general doubts & frequently asked questions of ITR Filers, such as:
- Why an ITR should be filed in India by NRIs/Expatriates/Others?
- Why an ITR must be filed before Due date?
- Relevance, importance of filing of ITR in India by NRIs/Expats?
- Important reasons for filing of an ITR in India by Due Date by NRI/Expats/Others?
- What if the ITR in India is not filed by Due Date?
- Points for consideration in relation to NRIs/Expats ITR?
- Filing of ITR in India - What are the things/tips/points, which NRI/Expat should keep in mind?
- What are the consequences for not filing of an ITR in India by Due Date?
- Whether filling of ITR in India is beneficial/compulsory?
- I am an NRI/Expatriate. Should I file an ITR in India? Should I file the ITR before Due Date?