Late fees and penal interest for delaying the filing of income tax returns are governed by the Income Tax Act,1961.
Section 234F, which is introduced in the Finance Act, 2017, imposes a late fee for individuals who fail to file their income tax returns by the due date.
In addition to late fee, section 234A applies to the interest charged for delayed filing of income tax returns. Taxpayers may also be liable to pay interest under section 234B and 234C for delay in payment of advance tax.
The accumulation of late fees and interest can lead to a significant increase in the total amount owed. Continued failure to file returns can lead to more severe penalties, including scrutiny from the tax department.
The due date for filing individual tax returns is usually 31st July for the financial year ending on 31st March of the same year. However, this date can vary, so it’s essential to check the current tax year’s guidelines, notification and circulars published by CBDT.
Late Filing Penalty for not filing income tax return before deadline
If you missed the original ITR filing deadline (usually July 31), you can still file a belated income tax return until December 31, 2023.
The penalty for late filing depends on your annual income level.
If your annual net taxable income is more than 5 lakh rupees, you’ll be charged a penalty of 5,000 rupees for missing the original ITR filing due date. Applicable to both financial years 2023-24 and 2024-25.
If your net taxable income is less than 5 lakh rupees, the penalty for filing a belated return for FY 2023-24 and FY 2014-25 is 1,000 rupees.
As per income tax laws, no penalty is applicable to taxpayers filing ITR after the due date if their taxable income does not exceed the basic exemption limit.
The basic exemption limit refers to the gross taxable income before taking any eligible deductions into account.
So, if your income falls within this limit, you won’t face any late filing penalty
Penal Interest for delay in filing income tax return
In addition to the penalty, you’ll also pay penal interest on any outstanding tax amount due.
Section 234A imposes interest when taxpayers fail to file their ITRs within the prescribed due date.
The due date for submitting your tax return is usually on or before 31st July of the relevant financial year.
If you miss the due date for filing your ITR, you’ll be liable to pay penal interest at a rate of 1% per month or part of the month (simple interest) on the outstanding tax amount.
The interest is calculated based on the number of days your ITR has been delayed from the due date until the actual filing date.
So, the longer you delay, the more interest accumulates on the unpaid tax amount.
For example, let’s say your total tax outstanding for the financial year 2023-24 is 1 lakh rupees (net of advance tax paid and TDS, if any).
If you file your return on 31st December 2024 (instead of the original due date of 31st July 2024), you are 5 months late in your tax payments.
Interest = Rs 100,000 × 1% × 5 = Rs 5,000
This Rs 5,000 is in addition to the regular tax amount you’ll be paying.
Timely filing of your income tax return (ITR) is crucial to avoid penalties and interest
In addition to interest under section 234A, you may be liable to pay interest under section 234B and 234C if advance tax is applicable.
Understanding these provisions can help taxpayers manage their responsibilities and avoid unnecessary financial strain.
Ensure returns are filed before the due date to avoid late fees and interest.
Make timely advance tax payments to minimize interest under Section 234B.
In addition to late fee and penal interest, if you do not file or late your income tax return, you will not be getting certain benefits.
Not having filed your income tax return (ITR) can affect your ability to obtain loans, credit cards, or mortgages, as lenders often require proof of income through ITRs.
If you have tax deducted (TDS) and do not file your ITR, you won’t be able to claim any refunds you may be eligible for.
The Income Tax Department may issue notices if you fail to file your ITR, requiring you to explain your non-compliance.
If you don’t file your ITR, you won’t be able to claim certain deductions or carry forward losses to future years.
As a taxpayer, you should understand these provisions and file your income tax return within the deadline allowed.
