How missing income tax filing deadline will affect you later

What will be fine for missing to file IT returns by deadline? Will you be jailed ? What will be the drawbacks in future? Let us focus in detail.

All Indians do not file their taxes on time and sometimes missing income tax filing date can come back to bite you later. I myself had missed it few years back and had to pay it with fines at later date with fine and interest.

What is IT filing deadline date ?

The deadline date for income tax filing is usually 31^st July every year. For 2019, the IT department has extended the date to 31^st August 2019 for FY 2018-2019. Now, just because it has been extended does not mean you need to postpone filing your returns.

What is Financial year and Assessment Year?

Usually Financial year is from 01^st April to 31^st March next year. FY 2018-19 is from 01^st April to 31^st March 2019. Now this FY 2018-19 income will be assessed in AY 2019-20.

The same logic applies for all future years. Similarly, for FY 2019-20 which extends from 01^st April 2019 to 31^st March 2020, the assessment will be done in AY 2020-21.

How much is the fine for missing IT filing deadline?

So how much is the actual fine for missing the income tax filing deadline. From FY 2017-18, a penalty has been applied to those who miss the due date for filing returns.

This has been enabled with addition of Section 234F from FY 2017-18 (ie., AY 2018-19) in Income Tax Act . Assuming last date this year is 31^st August 2019, this law calculates your fine as follows.:

Scenario 1: If Mr. Arun has taxable income Rs 8,50,000. He files income tax on 30^th Oct (missing 31^st Aug 2019 deadline), then he will pay fine of Rs 5000. In addition to this he must pay his tax liability. Now if he files on 31^st March 2020.

Scenario 2: Now if Ms. Swetha has taxable income Rs 4,00,000. She files the returns on 30^th Oct 2019 or 31^st March 2020 for FY 2018-19, then her final fine will only be limited to Rs. 1000. She has to pay he outstanding tax liability and fine Rs 1000.

Can I be prosecuted for missing IT filing deadline ?

The next question someone with big tax liability but missed filing IT return by deadline asks is – Can I be jailed or sent to prison for missing to file tax returns in time.

Well, the answer is that IT IS POSSIBLE. It entirely depends on the assessing officer if he decides to forward your case for prosecution. The judge would decide your prosecution and applicable jail time, if required.

The term usually can be from 3 months to 2 years for people with tax liability more than Rs 3000 but less than Rs 25 lakh. However, if your tax liability exceeds Rs 25 lakh then the maximum imprisonment can extend upto 7 years. Completely depends on the court outcome.

So it is always better to file your income taxes on time every time. Remember it is not enough to file your returns you must also e-verify your income tax returns by enddate.

Main drawbacks for missing income tax filing return date

As with many things when you kiss deadline , there are drawbacks for missing your filing deadline as well. It ranges from paying interest to delayed refunds.

• Interest for tax liability pending

Under section 234A, you are liable to pay 1% simple interest on outstanding tax payment after last date of deadline. The interest will be calculated from 01^st September 2019 when deadline is 31^st August 2019. It will be calculated until the day you pay the tax.

Assuming your tax pending was Rs. 2,00,000 for FY 2018-19 and you decide to file your returns on 31^st January 2020. You need to pay interest of Rs 2000 for each month starting from September 2019.

So far Sep, Oct, Nov, Dec, Jan ie., 5 months you will pay total interest of 2000×5 = Rs 10000.

• Cannot set-off loss from income in future years

IT department allows you to set-off losses for future years (8 assessment years in most cases and 4 years in few cases). If you file a delayed income tax return, then you cannot set off loss from income and carry forward loss to future years.

The only exception is income loss from house property which can be carried forward. This penalty to prevent carry forward of loss is a major setback for filing belated returns.

• Delay in receiving refunds

Late filing of income tax returns leads to delayed refunds from IT department. It is obvious that you will be pushed back in queue and those who filed on time will be given precedence. 

Final calculation of payables if you miss income tax filing deadline

Now if you assume scenarios discussed above, then final amount payable will be as follows:

Scenario 1: Here Mr. Arun is liable to pay Rs 82,500 (=12500+20% above 5 lakh ie.,Rs 70000).

Here interest is Rs 1650 ( 1% interest for 2 months, ie., 825*2) when filed on 30^th Oct 2019. But interest is (1% interest for 7 months ie., 825*7=5775) Rs 5775

Scenario 2: Now Ms. Swetha does not have  any tax payable. But still she must have filed her income tax on time before the deadline 31^st August 2019.

So the tax payable considerably increases as you delay filing your returns. It is always advisable to file your income tax returns by the deadline. Don’t forget we’re legally required to file income tax by the deadline of 31^st August 2019 for FY 2018-19.

Now, till when can you file the belated return?  Remember you can file income tax return for current financial year only until end of next financial year. For, FY 2018-2019, you can file income tax return only till 31^st March 2020. For FY2019-20, you can file income tax return only till 31^st March 2021.

If you miss filing returns until end of next financial year, then you cannot file the returns until you receive tax demand from IT department. Do not miss filing your income tax returns by the deadline of 31^st August 2019.

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