The deadline to file an income tax return (ITR) for the fiscal year 2020-21 is approaching quickly. As of December 28, 2020, the income tax department announced that over 4.37 crore income tax returns for the assessment year 2020-21 had been filed, up from 4.23 crore the day before. Due to pandemic-related delays, the deadline for filing an ITR without incurring a penalty has been extended several times, the most recent being on December 31.

We examine the ramifications of late ITR filing. And now, if you do not follow this timetable for filing your ITR for the 2019-20 fiscal year, you will face severe consequences:

  • For Fiscal Year 2019-20, you will not be eligible to file a return after March 31, 2021:

This is because any income tax return not filed by March 31, 2021, would be considered a time-barred return, and the income tax code does not allow for the filing of time-barred returns.

  • If you are in the taxable bracket, you will receive an income tax notice:

If a taxpayer does not file a return for an assessment year but has taxable income, the department of income tax will give him or her a notice. In the case of unpaid taxes, a penalty of 50-200 percent of the unpaid taxes is due, as well as interest at the rate of 1% per month for the duration of the delay.

  • If the reason for not filing an ITR is determined to be tax evasion, the penalty would be severe:

Such defaulting taxpayers can face prosecution under section 276CC of the Income Tax Act, which may result in harsh imprisonment of not less than 3 months and up to 2 years, as well as fine implications.

Furthermore, if the tax evasion totals more than Rs. 25 lakh, the sentence could range from 6 months to 7 years in prison, plus a fine. However, if the amount evaded is less than Rs. 10,000, no such action can be pursued.

  • Allowance for such a delay in filing a return due to a legitimate reason:

The authority body has the right under section 119(2)(b) of the Income Tax Act 1961 to consider any application or request for an exemption, deduction, or other relief even after the time set out in the IT Act has expired. If the reason for not filing ITR is valid, the taxpayer may apply for condonation relief by presenting appropriate supporting documentation.

  • Other than the aforementioned, if the return is not filed by the due date, some additional consequences apply.

There will be a late filing fee of Rs. 10,000, but the penalty sum will be reduced to Rs. 1000 if the income is less than Rs. 500,000. Since the return is filed after the due date, the taxpayer forfeits any of the deductions and/or the right to set off or carry forward losses (besides house property loss).

The tax sum that remains unpaid will be subject to interest at a rate of 1% per month or part of a month under section 234A of the Income Tax Act.

Apart from these two fines, interest at the rate of 1% per month will be levied under Section 234A before the taxes are paid.

Individuals should be aware that if they pay the fines, they will file late returns before March 31, 2021. Until three years ago, if a late return was filed, no revisions were permitted, but now taxpayers can file revised ITRs.

If a person fails to file an ITR, the income tax department may begin prosecution proceedings for a period of three months to two years. If the amount owed exceeds $25 lakh, the time limit may be extended to seven years. Penalties can be imposed by the tax department if income is under-reported. Remember that filing tax returns on time makes it easier to get a loan in India, as most lenders want borrowers to send their income tax return records. Furthermore, filing your tax returns on time may result in you receiving your refund as soon as possible.

I hope this article is going to be fruitful for you.

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