Penalty on Late filing of Income Tax Return

The due date for the Income-tax return for Financial Year 2020-21 ay 2021-22 for non-audit cases is coming in the few days i.e 31.12.2021. Three is a Rush on e-filing the return on the Income Tax portal. Almost 7-10 lakh returns are daily filed on the Income-tax portal. Almost 4 crore returns have already been filed but yet 2-2.5 crore have yet to be filed as per the previous year's Data. So many taxpayers, if not wake up in the coming days then they will become the late filer and have to face the consequences of the late filing of return including Penalty.

What is Late Filing of Income Tax Return?

If you do not file your Income-tax return within the due date (for Fy 2020-21 extended due date is 31.12.21) then a late-filed return will be called a Belated return. The is covered under section 139(4).

Section 139(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), may furnish the return for any previous year at any time before three months prior to] the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

So as per rule belated return can be filed 3 months before the end of the assessment year that is by 31 December in the assessment year, However, for AY 2021-22 belated return due date has been extended up to 31.03.2022

Earlier Belated return can not be revised but now belated return can also be revised (section 139(5))

Please check the video on Penalty on Late filing of Income Tax Return

Consequences of Late filing of Income Tax return

1. Penalty 

If the Income-tax return is not filed with the due date then you have to pay a penalty of  Rs 5000, However, if your taxable income is up to Rs Five lakh then the penalty applicable will be Rs 1000/-. Though we have used the word penalty, in technical terms it is a FEE, not a penalty.

Relevant Section

Fee for default in furnishing return of income.

234F.(1) Without prejudice to the provisions of this Act, where a person required to furnish a return of income under section 139, fails to do so within the time prescribed in sub-section (1) of the said section, he shall pay, by way of a fee, a sum of five thousand rupees :

Provided that if the total income of the person does not exceed five lakh rupees, the fee payable under this section shall not exceed one thousand rupees.

(2) The provisions of this section shall apply in respect of the return of income required to be furnished for the assessment year commencing on or after the 1st day of April 2018.

Penalty Vs Fees  

Erstwhile provisions provide for a penalty of Rs.5,000 under section 271F in the case where the return is furnished after the end of the relevant assessment year provided there is no reasonable cause for such delay.

The fees provision u/s 234F is made with a view to ensure that returns are filed within the due dates specified in section 139(1).

Fees levied under section 234F will be leviable on all assessees who have furnished returns beyond the due date specified under section 139(1) irrespective of the reason for such delay and whether all the taxes have been paid through TDS or Advance Tax. 

Also, the assessee cannot justify his cause for delay under any appeal against the same as there is no provision to consider the reasonable cause for the delay on the part of the assessee.

2. Loss can not be carried forward: Loss (other than loss under the head “Income from house property”) cannot be carried forward.

• you are not able to carry forward the following type of losses if file return after the due date (read more about setting off and carry forward of Losses)
• Speculation loss
• business loss excluding loss due to unabsorbed depreciation and capital exp on scientific research
• short term capital loss
• long term capital loss
• loss due to owning and maint. of horse races
• However, there is no impact on the following type of losses even if the return is furnished after the due date
• loss from house property
• business loss on account of unabsorbed depreciation and capital expenditure on scientific research.
• Though delay can be condoned as per circular CIRCULAR 9/2015 [F.NO.312/22/2015-OT], DATED 9-6-2015 on fulfilling of certain condition)

3. Certain exemption deductions are linked with due date: Exemptions/deductions under sections 10A, 10B, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID, and 80-IE are linked with the due date.

4. Levy of interest under section 234A.: Interest Under section 234A @ 1 % per month applicable on Net outstanding Tax due amount.

5. Loss of Interest on your refund: If you are claiming a refund and you are eligible to receive interest on your refund then you are not eligible to receive interest on the period of delay.

The extension is due date Expected?

It is expected That Due date to file an Income Tax return May be extended, we have also demanded an extension in the due date, please see our video on this subject.

What to do?

So, all efforts should be made to file your Income-tax return in Time before the due date to file such return. However, In spite of all efforts, If you are not able to file your return on time then  you should at least 

1. Deposit your Balance Tax due within the due date so that Interest under 234A can be saved
2. Deposit unused amount of capital gain in Capital Gain Account scheme