Income tax filing: Four reasons why you should not wait till September
While for individuals, filing income tax due date is not much far with just three months in hand. But, for business there is still some time.
As per the income tax regulations, the due date of filing income tax return for FY16-17 is July 31, 2017 for individuals, and September 30, 2017 for businesses.
So, now the question is should the businesses file the income tax now or wait till September? Speaking with Zeebiz, Chetan Chandak, Head of Tax Research, H&R Block India, said that delay in filing the tax returns could lead with huge penalties.
Chandak shared four reasons why you should do it now:
1. Save yourself from Paying Penal Interest
In case there is a delay in filing your tax returns, and you have some taxes unpaid, you have to pay a penal interest u/s 234A (in addition to the interest payable u/s 234C & 234B for delay/default in payment of advance tax) at 1 percent per month up to the date of filing the returns.
This interest will, however, be charged only if there is any tax payable by you. But if the balance tax has been fully deposited by you before 31st March of that financial year, then payment of interest u/s 234A will not be applicable even if the return is filed after the due date.
2. Avoid Losing Interest on Refunds
As per the income tax act if you have paid excess taxes to the government then you are entitled to receive interest @ 0.5% pm on the excess amount. Interest in such a case shall be allowed for a period commencing from the 1st day of April of the assessment year to the date on which the refund is granted.
But no interest is payable for the period attributable to the delay in filing the tax return beyond the due date, by the taxpayer. This means that you will not get any interest for the period starting 1st April of the assessment year till you file the return if it is filed after the due date.
Try and file your returns before the due date to avoid suffering from the loss of interest on refunds.
ALSO READ: First time filing income tax? Here's all you need to know about Form 16 and Form 26AS
3. Late Filing may Lead to Denial of Carry Forward of Losses
You can carry forward your losses under various heads of income that you have incurred in the financial years to next 4/8 assessment year (as the case maybe). But the carry forward of losses and it’s set-off against future gains is allowed subject to few conditions. This set-off can result in substantial future tax saving for you.
However, if you wish to forge your entitlement to offset these losses against future taxable gain, you must file your tax returns and claim the related loss before the due date (i.e. 31st July, 30th September, as applicable to you).
4. File Tax Returns in Time to Avoid Penalties and Prosecution
Generally, you are liable to pay only interest on the amount of taxes due if you fail to furnish the tax return with the time allowed under the Act. But if you don’t furnish the tax return before the end of the assessment year the tax officer may impose a discretionary penalty of up to Rs. 5,000 u/s 271F of the Act.
Further, the tax authorities can also initiate a probe into the reasons for non-filing of the tax return by you.
And in few extreme and rare cases where it is found that you wilfully avoided filing the tax return within the time allowed it may impose an imprisonment u/s. 276CC as under. In case if the tax sought to be avoided was less than 25 Lakh – Imprisonment for a term 3 months to 2 years.
In case if the tax sought to be avoided was more than 25 Lakh – Imprisonment for a term 6 months to 7 years.
However, the taxpayer will not be prosecuted for failure to file the return if the additional taxes payable (after adjusting TDS and advance tax) by him does not exceed Rs. 3000.
Apart from all the technical points mentioned above, filing your tax returns on time becomes important if you wish to apply for visas, bank loans, etc.
Moreover, late tax filing can further delay processing of your tax refunds. Therefore, make a promise to yourself that now onward you will file your tax returns on time to avoid any penalties and hassles relating to taxation.