These are taxing times, especially since the Income Tax filing deadline is so near. In case you don’t know the IT-return filing date has been extended till 4th Aug 2010. So there is still hope that if you could not file the Income Tax return by 31st July, you have few more days to go.
It is said that “There are only two things in life which are inevitable : Death and Income Tax”. If death comes calling there is no escape, but fortunately there is some breather if you fail to file your income tax by the deadline.
Picture courtsey Jeremy Brooks
So what really happens if you fail to file the IT-return by the due date (4th Aug this year)? So IT sleuths are not coming to your house, nor you will be put in the jail or be asked to pay heavy penalty. Actually, nothing significant happens if you fail to meet the deadline, so do not panic at all.
When it comes to filing your Income Tax returns, the tax laws are not so stringent. Let’s first understand the terminology:
Income Year: The year in which you earn income. This year’s income you are liable for tax.
Assessment Year: The year in which you need to file the return or assess your income. The assessment year is next year of the Income Year.
Case 1: No Net Taxable Payable
Net Taxable Payable is any tax after the TDS/Advance Tax paid. In such case, there is no penalty for filing tax return till the end of assessment year.
For example: Income Year: 2009-2010 Assessment Year: 2010-2011. So if you fail to file IT return by 31st July 2010, you can still file it by 31st March 2011 without any penalty. Anytime, after that you need to pay a penalty of Rs 5000
Case 2: You have some Net Taxable Payable
If you have some Net Taxable Payable, the only difference with case 1 is to pay an additional 1% per month penalty on the Net Taxable Payable.
For example: Income Year: 2009-2010 Assessment Year: 2010-2011 Net Taxable Payable = Rs 1000. So if you fail to file IT return by 31st July 2010, you can still file it by 31st March 2011 with penalty of 1% per month on Rs 1000. Anytime, after that you need to pay a penalty of Rs 5000 + 1% per month on Rs 1000
In case you have any losses to carry forward, you can not if you do not file your IT return on the due date. The only exception is the losses due to “Income from house property”, which can be carry forward irrespective of whether you filed your return on due date or not.
It is known that IT department has started some random check on taxpayers (computer randomly selecting a taxpayer). The IT department can ask the taxpayer for proof of various income through investment, fixed deposits, stocks etc.
Consequences of not declaring miniscule income
So what happens if you “forget” to declare those small miniscule income like Fixed Deposit Interest or Bank Interest? For e.g. you accumulated an interest through FD/Saving account interest and fail to declare it to the IT department, with Rs 1000 as tax payable pending. In that case:
1) You are liable to pay a penalty of Rs 1000 – Rs 3000 (100% – 300%) of the tax not declared.
2) The interest on Rs 1000 @ 1.5% per month simple interest from the due date of tax filing to the date it is discovered that you missed declaring the income tax
3) If by adding this undisclosed income, you change the tax bracket (e.g. if your declared income falls on the border of 20% bracket and when adding this new undisclosed income you fall in 30% bracket), then additional penalty is applicable.
The interesting aspect is that most people file through CAs or Online tax websites or tax consultants. But when the above case happens with you, then you can not blame any of these agents. You and only you are entirely liable for such missing from IT return.
So don’t consider IT return filing as just another formality, take extra care to ensure it is error free.
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