What happens if you miss filing ITR on the last date?

Do you just pay your taxes and avoid the return filing part? Well, there is something you got to know.

As per Indian tax laws, taxpayers had to not just pay taxes but also file their Income Tax Returns for the financial year 2020-2021 by July 31, 2021. This has been historically followed to give the taxpayers a 4-month window after the year end, so that they can consolidate their income details and file their tax returns subsequently.

But the date of filing income tax returns and audit reports for certain tax payers was extended this year on account of multiple reasons.

First, the rising Covid cases made it difficult for everyone across India to get their accounts verified and submitted.

Second, tax payers are using the new income tax portal developed by Infosys this year and are facing basic problems like login issues, PAN card verification, ITR download issues, etc, which is taking time to be resolved.

Also, since the entire process of ITR filing has become faceless, unlike historical times, it's causing a big delay in filing necessary client documents.   

Faceless assessment Scheme provides for a team-based assessment with dynamicjurisdiction and no human interface. It is major tax reform based on the key principles of efficiency, transparency and accountability.(1/2)#Budget2021Recap pic.twitter.com/W6xXXFcb57

— Ministry of Finance (@FinMinIndia) January 11, 2022

THE PRESS RELEASE ISSUED BY CBDT

As many taxpayers were unable to follow the due date due to the 2 main reasons, the CBDT extended the due date. 

On consideration of difficulties reported by taxpayers/stakeholders due to Covid & in e-filing of Audit reports for AY 2021-22 under the IT Act, 1961, CBDT further extends due dates for filing of Audit reports & ITRs for AY 21-22. Circular No. 01/2022 dated 11.01.2022 issued. pic.twitter.com/2Ggata8Bq3

— Income Tax India (@IncomeTaxIndia) January 11, 2022

So what does the circular mean? We will get to the gist of it, but first, note this: 

For individuals (like you and me) whose accounts are not required to be audited, the deadline for filing ITR for FY 2020-21 (using ITR-1, ITR-2 and ITR-4), has expired on December 31, 2021.

Entities liable for tax audit means: Indian Companies that cross a turnover limit of Rs 1 crore have to carry out a process called tax audit. There are also some other circumstances where a company might be eligible to conduct tax audits. These companies have different due dates than normal tax payers. 

Entities liable for transfer pricing: International and domestic companies who carry transactions over a certain limit and fulfill certain criteria are liable to conduct transfer pricing audits and report on the same. These companies too have different due dates. 

VERIFICATION OF YOUR ITR

The CBDT has announced February 28 as the last date to verify your Income Tax returns for the FY 2020-21. Now what does that mean? The IT department will process your returns only if they are verified by you, so this is mandatory.   

Income Tax department on Sunday urged tax payers to verify their tax returns for Assessment Year (AY) 2020-21 before 28 February, the last date for the same. #IncomeTax pic.twitter.com/ACU9HBxPWK

— Hari Krishnan Pongilath (@h_pongilath) February 22, 2022

WHAT HAPPENS IF YOU FILE YOUR ITR A LITTLE LATE?

So, basically, say you forgot to file your IT returns because you were busy partying at home on December 31. You came to your senses a couple of days later and you finally managed to file your IT returns on, say, January 5, 5 days after the due date. Now what do you have to pay extra?

Brace yourself for some cash outflow: 

PENALTY / LATE FILING FEES (Sec 234 F) 

INTEREST FOR DELAY IN FILING INCOME TAX RETURN (Sec 234A)

As per this section, the person has to pay 1% interest for every month for which tax remains unpaid, the penalty for which starts immediately on the date after December 31, 2021. But if your tax liability is above Rs 1 lakh and you have not paid taxes before July 31, 2021, you are liable to pay interest from August 1, 2021. 

So, for example:

If your income is Rs 6 lakh and your tax liability is say Rs 8,400, which you pay on January 5, then you will have to pay a penalty as per Sec 234F and Interest as per 234A, which comes up to:

Interest: Rs 8,400*1% for 1 month = Rs 84

Penalty: Rs 5,000

Total Outflow: Rs 5,084 

Now, if your tax liability is more than Rs 10,000 (instead of Rs 8,400 here), and you have not paid at least 90% advanced tax on prescribed days, then there will be a separate penalty under Section 234B and 234C.

Have you ever paid a penalty for late filing?