Filing an ITR is a way to inform the Government about your income.  If you don’t inform the government, you have to face penalties and problems. If you are in the taxable position, then you must file income tax returns. The Income Tax Department has been reminding several times to file Income Tax Returns. if an individual is missing to file an ITR, it may invite a penalty of up to Rs 10,000. the delay or pause in the filing of income tax returns also makes you liable to pay interest on the taxable amount. 

Taxable Income Range (In Rs.)Tax Rate prior to Budget 2020 (Existing)Tax Rate Post Budget 2020
0-2.5 lakhExemptedExempted
2.5-5 lakh5%5%
5-7.5 lakh20%10%
7.5-10 lakh20%15%
10-12.5 lakh30%20%
12.5-15 lakh30%30%
Above 15 lakh30%30%

What are the issues faced when ITR is not filed?

  • Penalty
  • Interest must be paid on the tax amount
  • No carry forward of losses
  • Delay in the method of return of income
  • Reduced time for improving your income tax returns  

1 Penalty: As we know a penalty is a three-tier fee system that has been introduced for not filing income tax returns within the due date. If a return is filed beyond the due date, then fees payable will be Rs. 5,000, otherwise it will be Rs. 10,000.  in the case of taxpayers whose annual income does not exceed Rs. 5,00,000, the fees payable would be restricted to Rs. 1,000.

2 Interest must be paid on the tax amount: When the income tax return is not filed within the due date, the interest at the rate of 1 percent per month or part of the month is levied until the date of filing the income tax return. The stated interest is payable on tax payable after decreasing the Tax Deducted at Source (TDS), tax collected at source (TCS), advance tax and other reliefs, tax credits available under the law. TDS is deducted by the buyer or payer while TCS is collected by the receiver or seller.

3 No carry forward of losses: If ITR is not filed within the due date, the taxpayer will not be allowed to carry forward any loss under the head profits and gains of business or profession or capital gains. However, not absorbed reduction and loss under the head income from house property, shall be entitled to be carried forward.

4 Delay in the method of return of income: Once the return is filed and verification of the same is duly completed, the central processing center in Bangalore, of the Income Tax Department, processes the income tax return. It is only then that the tax liability or refund of the taxpayer is defining. In case the taxpayer is claiming a refund, the delayed filing of the income tax return will result in a delayed receipt of the tax refund. 

5 Reduced time for improving your income tax returns:  If you are filing an ITR and you are ending up with a mistake, there are certain rules to follows. Earlier, taxpayers has a 2-year long window to review and resubmit an erroneous ITR, which has now been reducing to one year from the end of the financial year. Hence, as soon as you file, the longer would be the window available with you for revising your returns to rectify errors if any.

Is it compulsory to file Income Tax Returns?

it is compulsory to file an income tax return (ITR). If you are not filing ITR, it will not only attract penalties but can also hamper your chances of getting a loan, or a visa for travel purposes or property registration. As per the Income Tax Act, the following are the firms that require the mandatory filing of ITRs in India:

  • People whose gross total income exceeds Rs 2.5 lakh. This limit is Rs 3 lakh for senior nationals and Rs 5 lakh for super senior citizens.
  • Those who want to demand an income tax refund.
  • Those who are in need to carry forward a loss under a head of income.
  • Those who acquire income from assets or property that is under a trust for charitable or religious purposes or a political party or a research association, news agency, educational institution, infrastructure debt fund, a hospital, any authority, body or trust.
  • International companies are taking advantage of a business in India.
  • Companies or firms are irrespective of whether you have profit or loss during the financial year.
  • Even NRIs (Non-resident Indian) who have income that exceeds Rs. 2.5 lakh which is received or happened in India, is expected to file an income tax return in India.
  • Resident individuals who have an asset or financial interest in an entity located outside India. (Not applicable for NRIs or RNORs) 
  • Residents and signifying authorities in a foreign account. 

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