Only 1 Day Left for ITR Filing: Know Consequences for Non-Filing Returns

With the current deadline for filing your income tax return (ITR) for the financial year 2023-2034, it is important to understand the consequences that would arise if it was not filed on time. The last date to file your ITR for the assessment year (2024-2025), according to the official income tax department website, is July 31st, 2024, for entities that do not require an audit.

Income tax is a direct tax that is charged on the annual income of an entity/individual in a particular financial year. In India, it is governed by the Income Tax Act, 1961. Filing an ITR is a vital obligation for qualifying individuals and organizations in India. As the upcoming deadline is July 31st, taxpayers are required to collect all the necessary documents and submit their returns on time to maintain compliance and avoid potential fines that could arise. As it doesn’t take much time to file your ITR and as it is a mandatory obligation imposed on an entity/individual, it is always better that the assessee files the ITR on time.

What are the consequences of not filing ITR?

1. The main repercussion of not filing your ITR is the penalty and fines that would arise for the non-payment. We shall look into the penalties by referring to the Income Tax Act of 1961.
2. Section 234 F of the Income Tax Act deals with the fee for default in furnishing ITR. According to this section, if a person who is required to file his income taxes under Section 139 of the Income Tax Statute fails to do so, he is liable to pay a fine of Rs. 5,000 if the return is furnished after July 31st, and before or on December 31st. And if the ITR is filed after December 31st, then the entity or individual is liable to pay a fine of Rs. 10,000. If the person’s total income does not exceed five lakh rupees, the fee payable under this section is limited to Rs. 1000.
3. Section 271 H of the statute deals with penalties for failure to furnish statements, etc.

A person has to pay the fine if the assessing officer directs him to do so as per the situation.

2. Prosecution

If a person refuses to file a return despite receiving notifications, the income tax officer may commence prosecution. The term of the prison might range from three months to two years, with a fine. And it may extend to up to 7 years in certain situations.

3. Delay in receiving your Income Tax Refunds

An income tax refund is the amount initiated by the Income Tax Department when taxpayers overpay their taxes while completing an ITR for a specific assessment year. If a person is eligible to receive income tax refunds, then he should file his ITR on time so that he will receive the refunds without delay.

4. Interest for defaults in furnishing returns of income – Section 234 A.

             Aside from the penalty, the taxpayer will be charged interest of 1% per month or part thereof on tax owed until payment is received.

5. Loss of the feature of carrying forward of losses

For a taxpayer to enjoy the benefit of carrying forward of losses, the minimum requirement he has to satisfy is the timely filing of ITR. Thus, if a taxpayer does not file his ITR before the deadline, you will be unable to claim any business or capital losses against your future profits. This may also be disadvantageous to the future tax filings

6. Mandates for loan and visa applications

A person applying for a visa or a loan should be mostly required to submit his recent ITR filings to avail them. Lenders and embassies frequently ask the taxpayer for the last three years (ITR) in order to ensure that they are eligible and to evaluate their financial situation. Filing these returns not only strengthens a person’s application but also provides proof of his financial history, and there could be chances for your application to be denied if they find out that you are not a person who does not even file their taxes.

Why should a person file an ITR?

The ultimate purpose for an entity to file an ITR is to satisfy their tax obligation. Filing an ITR is a sign that an individual is a responsible citizen who is ready to fulfill his duty of payment of taxes. It is always encouraged to file your ITR before the deadline, which is July 31st, 2024, after which a penalty may arise and they may be fined. ITR  is considered as an authoritative and reliable documentation of an individual’s financial standing and earnings. This official record is a reliable source for determining an individual’s economic standing for a variety of official purposes because it offers a thorough and confirmed document of their income and overall financial situation. For different financial purposes, such as loans, credit cards, overdraft facilities, cash credits, and bill discounting services, lending institutions typically review the applicant’s ITRs from recent years.

Thus, it is always better to file your ITR before the deadline, as it is the characteristic of a responsible citizen to file their taxes on time. The delay in filing ITR could lead to penalties, fines, prosecution, etc. So, if you want to save your money, better file your ITR on time.

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