Tax breaks that you will forgo on failing to file ITR on time

The due date to file income tax returns (ITR) for the assessment year 2022-’23 (financial year 2021-’22) is 31 July. This deadline is for individual taxpayers who do not need to get their accounts audited. Missing the deadline not only attracts penalty, but you will also have to forgo certain tax breaks when you file belated returns, . 

Penalty for late filing

Those who miss the deadline of 31 July can file a belated ITR till 31 December, but they will have to pay a late filing fee. For incomes above ₹5 lakh, the late filing fee is ₹5,000, while others have to pay ₹1,000. 

Late filing fee will also apply to those taxpayers who may have income below the tax exemption limit of ₹2.5 lakh but are mandatorily required to file ITR. This includes taxpayers who hold a foreign asset or have earned foreign income, paid over ₹1 lakh in electricity bill during the financial year, deposited over ₹1 crore in one or more bank accounts and paid over ₹2 lakh on foreign travel for self or family. 

Interest on due tax

If you have outstanding tax after the 31 July deadline, you will need to pay monthly simple interest of 1% on the outstanding amount. “This kicks in from the first day of the month and applies even for part month,” said Karan Batra, co-founder, charteredclub.com.  For instance, if you pay the outstanding tax on the fifth day of a particular month, you will need to pay 1% interest for the full month.

Prakash Hegde, a Bangalore-based chartered accountant, said if the tax department, after assessing your ITR, asks for additional tax that you have missed calculating correctly, then you will have to pay  interest on that additional amount with retrospective effect. 

Can't carry over losses

Taxpayers can reduce their tax liability by offsetting losses from capital assets and business against other incomes, subject to conditions as laid out in IT Act, and even carry forward unsettled losses to subsequent years, as applicable to different income heads. But, carrying forward the losses is not permitted in the ITR filed belatedly. 

“One can still offset losses but can’t carry it forward to offset it against future incomes. However, capital loss from house property is exempt from this rule and can be carried forward to the next assessment year,” said Hegde.