Missed ITR Filing Deadline? Know More About Belated Return Filing

I received a call yesterday from Govind, a neighbour who seemed quite worried. He said that he was stuck for a couple of months in his on-site project, and he would not be able to collect his documents for his Income Tax Return before his return. He was worried about missing the due date of filing his ITR. Being a tax professional and a good neighbour, I helped him with this information:

“31^st July is not the end of life, at least for this year. Things will change from next year, but don’t feel so guilty for missing your date and filing your return after 31^st July.“ 

Why is Filing of Income Tax Return Important?

Many of my salaried friends are of the understanding that their employer has already deducted tax from their monthly salaries and hence, it is fine if they don’t file a return. Similarly, freelancers and professionals think that their clients have deducted TDS from their professional receipts, hence they are not required to do anything thereafter.

However, paying taxes and filing of returns are two separate activities. Even when you have paid your due tax, the Income Tax Department will only acknowledge your discharge of tax liability through your Income Tax Return (ITR). ITR is a form to be submitted each year with Income Tax Department which contains details about all the incomes earned during the year and the taxes paid thereon. A taxpayer may have multiple sources of income like salaries, FD interest, profit on the sale of shares etc. and ITR acts as a consolidated submission of all the incomes to the Govt. on an annual basis.

What is a Belated Return?

As per the provisions of Income Tax Act, a belated return is a return that has been filed after the prescribed due date for filing of ITR. So, in case you file your ITR after 31^st July (30^th Sept. for audit cases), your return will be considered as a belated return. Even while a belated return may put you at a disadvantage (mentioned below), you can still file your return without penalty until 31^st March of the next year. So, that gives you a breathing space of another 8 months, given that you have no taxes due.

In case you have some amount of taxes to be paid, interest at the rate of 1% per month shall be levied on the outstanding tax amount. Belated filing of ITR will still attract no penalty though.

However, this provision is also set to change from next year, since Union Budget 2017 introduced penalty on the belated filing of ITR, ranging from Rs. 1,000 to Rs. 10,000, depending upon the delay involved and the taxable income.  However, this penalty would be applicable only when we file the ITRs of FY 2017-18.

Time Limit for Filing of Belated Return

As per the existing provisions, one could file ITR till two years from the end of financial year, albeit with a penalty for filing after one year. For example, for the year ended 31 March 2016, one can file ITR up to 31 March 2018. However, from the returns for FY 2016-17, ITR can be filed only within the next financial year, instead of two financial years earlier.

Consequences of Filing a Belated Return

A major disadvantage of filing a belated return is that you cannot carry forward any losses to be set off against incomes of future years. You may, however, still set off the losses of current year against current year’s income.

Taxpayers were facing another setback for filing belated returns that they were earlier not allowed to revise their ITRs in case they had originally filed a belated return. However, this provision has since been changed to the advantage of the taxpayers and now revised return is allowed even in the case of belated returns.

As such, you can still file your ITRs until 31^st March 2018 in case you miss your due date of 31^st July. This year, it is fine. But, take this due date very seriously next year onwards or you may end up paying penalty for delayed filing of your ITR.