What Is The Penalty For Late Filing of Income Tax Returns?

Filing Income Tax Returns (ITR) on time is mandatory, and failing to meet the due date can result in penalties and interest charges. The Income Tax Department has outlined specific penalties for late filing, which depend on how late the filing is and the taxpayer's income level. Understanding these penalties helps taxpayers avoid additional financial burden and ensures compliance with tax laws.

Penalties for Late Filing of ITR:

Late Filing Fees under Section 234F:

For Late Filing Before December 31st:

If you file your ITR after the due date but before December 31st of the assessment year, the penalty will be ₹1,000 if the total income is less than ₹5 lakh.

If your total income exceeds ₹5 lakh, the penalty could be as high as ₹5,000.

For Late Filing After December 31st:

If you file after December 31st but before March 31st, the penalty is ₹5,000.

If the filing happens after March 31st, the penalty increases to ₹10,000.

For Taxpayers with Income Below ₹5 Lakh:

The penalty for late filing is ₹1,000, irrespective of how late the filing is, as long as the total income is below ₹5 lakh.

Interest on Tax Due:

Interest under Section 234A:

If you file your ITR late and there is any tax due, the Income Tax Department will charge 1% interest per month or part of the month on the unpaid amount, starting from the due date of filing until the date of payment.

Interest under Section 234B and 234C:

Section 234B applies if you did not pay advance tax and the tax due exceeds ₹10,000. You will be charged 1% interest per month on the unpaid tax.

Section 234C deals with the installment delay in advance tax payments. It results in 1% interest for every month of delay in payment of advance tax.

Loss of Certain Benefits:

If you file your ITR late, you may lose certain benefits such as carrying forward business losses, capital losses, or unused exemptions. This could increase your tax liability in future years.

Increased Risk of Scrutiny:

Late filing of ITR increases the risk of your return being scrutinized by the Income Tax Department. This could lead to further investigations, audits, and possibly additional penalties or legal consequences if discrepancies are found.

Consequences for Intentional Delays:

If a person intentionally fails to file their return or provides false information, more severe penalties can be imposed. The Income Tax Act provides for prosecution in extreme cases, leading to fines and imprisonment.

Example:

If an individual misses the ITR filing deadline of July 31st and files their return on October 15th, and their total income exceeds ₹5 lakh, they will have to pay a ₹5,000 penalty. In addition, if they owe any taxes, 1% interest per month will be charged on the unpaid tax amount. If they had business losses in the year, they would not be able to carry them forward, leading to higher taxes in the next year.