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Don't Panic If You Miss The Income Tax Return Deadline This Year. Here's why... - Outside View by PersonalFN

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Don't Panic If You Miss The Income Tax Return Deadline This Year. Here's why...
Jul 24, 2017

Life is full of uncertainties.

Due to certain unavoidable circumstances, there is a possibility that you could end up missing the due date to file your tax returns. Another setback is the anxiety of having to pay a penalty for this lapse.

You may have read that a delay in filing tax returns could attract a fine that can go up to Rs 10,000, under the provisions of a new Section 234F of the Income Tax Act.

If this is a stressor, stay calm because the penalty for default, under Section 234F, is applicable from next year.

But please note, the penal interest will still apply. This could be a considerable amount if your tax dues are high.

Under Section 234A, interest would be levied @1% per month, calculated from the due date. In addition to this, if you are unable to file your returns before the end of the assessment year, i.e. March 31, 2018, a fine of Rs 5,000 may still be applicable.

An assessing officer may, at his discretion, charge a fine of Rs 5,000 under Section 271F of the Income Tax Act. Section 271F states, if one fails to furnish tax returns before the end of the relevant assessment year, the Assessing Officer may direct that person to pay a penalty of Rs 5,000.

Thus, if you are filing a belated return for AY2017-18, make sure to do it before March 31, 2018, to avoid the probability of an additional penalty.

From next year onwards, ensure to file tax returns well in advance, because a window of opportunity to avoid the fine will not exist.

After April 1, 2018, the new Section 234F, in respect of penalty for delay in furnishing return, will come into effect, while the provisions of Section 271F shall cease to exist.

Under Section 234F, belated returns filed after December 31st of the relevant assessment year will attract a fine of Rs 10,000. For returns filed after the due date but before December 31st of the assessment year, there is a penalty of Rs 5,000. However, for individuals with a total income less than Rs 5 lakh, the penalty will be Rs 1,000. Under this section, not only are the fines steeper and applicable immediately after the due date, but the assessing officer plays no role in deciding the applicability of the penalty.

Thus, from the next assessment year onwards, if you delay filing your income tax returns, along with the tax and interest payable, a fee for delayed furnishing of return of income will be applicable.

Section 234F, excerpt from the Finance Act, 2017
76. After section 234E of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2018, namely:-

"234F. Fees for default in furnishing return of income.-

(1) Without prejudice to the provisions of this Act, where a person required to furnish a return of income under section 139, fails to do so within the time prescribed in sub-section(1) of said section, he shall pay, by way of fee, a sum of,-

(a) five thousand rupees, if the return is furnished on or before the 31st day of December of the assessment year;

(b) ten thousand rupees in any other case:

Provided that if the total income of the person does not exceed five lakh rupees, the fee payable under this section shall not exceed one thousand rupees.

(2) The provisions of this section shall apply in respect of return of income required to be furnished for the assessment year commencing on or after the 1st day of April, 2018."

If possible, always file your returns before the due date, even if you have to expedite the process. By rushing to file your returns, you may be apprehensive about making errors. However, this should not stop you.

If there are any unintentional errors, you can always file a revised return. For example, if you have missed to claim a donation under Section 80G, you can file a revised return and get a tax refund.

You can file a revised return under Section 139(5) of the Income Tax Act, if the original return is filed on or before the due date. You can file a revised return before the end of the next assessment year, which is March 31, 2019 for AY2017-18.

Please note, the deadline for filing revised returns has been reduced. From next year, i.e. AY2018-19, the deadline for filing revised returns is March 31, 2019. This is even more reason to plan your taxes well ahead of time.

There are several benefits of filing your returns well before the due date. Avoiding penal interest and late payment is the primary advantage. Apart from this, you will eliminate the stress of filing returns at the last minute and there will be sufficient time to eliminate errors, if any.

e-Filing your returns is an extremely simple process with the new one-page Income Tax Return (ITR) form. You can e-file tax returns from the comfort of your home. (Read: How To e-File Your Income Tax Returns In Few Easy Steps...)

It is equally crucial to set up a tax plan well in advance. Tax planning as an exercise is not just limited to filing returns and paying taxes. It is a process where you focus on the larger financial plan after accounting for your age, financial goals, ability to take risk, and investment horizon (including nearness to financial goals).

You can appoint a financial planner or a financial guardian to suggest the best tax-saving products enabling you to save tax and align them to achieve your financial goals as well. It would therefore be worthy to reach out to a Certified Financial Guardian - a mark of trust and respect, who can prudently counsel and handhold you to streamline your personal finances.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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