If you miss the deadline (currently December 31, 2021) to file your income tax return (ITR) for FY 2020-21, don’t worry, you can still file your ITR. An ITR filed after the due date is called a ‘Belated Return’. However, there are certain points you need to understand before you avail this last chance.
Following the amendments in the Finance Act, 2017, filing a belated return can cost you dearly. According to this, a late fee will be required to be paid, as applicable, by those filing belated ITR.
Here is a primer on how to file belated tax returns.
What is a belated income tax return?
If an individual fails to file his/her ITR before the due date, then as per section 139(4) of the Income-tax Act, 1961, he/she can file a belated return.
What is the deadline to file belated ITR?
A belated return can be filed at any time before three months prior to the end of the relevant assessment year or before completion of assessment, whichever is earlier. The government has reduced the time limit of filing belated ITR by three months. Till FY 2019-20, the belated ITR could be filed till March 31, however, from FY 2020-21, an individual can file ITR till December 31.
Due to novel coronavirus pandemic and glitches in the newly launched income tax portal, the deadline to file belated ITR has been extended from December 31, 2021, to March 31, 2022.
If you are filing a belated return for FY 2020-21, then you need to fill the applicable ITRs as notified for this FY, and not for any previous or later FY. The relevant assessment year for a financial year is the immediately succeeding financial year.
Can you revise belated tax returns?
Yes, ITR for FY 2016-17 and onward filed under section 139(4), which is applicable for belated tax returns, can be revised. However, belated returns filed for previous financial years cannot be revised because the income tax law was changed to allow this from FY 2016-17.
With effect from the financial year 2016-17, a belated return can be revised. However, remember the deadline to file a belated return and filing the revised return for FY 2020-21 has been extended to the same date March 31, 2022. Therefore, if you file your belated ITR for FY 2020-21 on March 31, 2021, then you might not get the opportunity to file the revised return as the deadline for filing the same also expires on March 31, 2022.
What do I stand to lose if I file belated returns?
You will have to pay a penalty and you will also stand to lose certain benefits for not adhering to the income tax filing deadline. Here are the disadvantages of filing a belated return:
As government has reduced the time limit of filing belated ITR by three months, a consequential amendment has been made in section 234F. As per the amendment if the belated ITR is filed, then the maximum penalty of Rs 5,000 will be levied. However, if the total income of the taxpayer is less than Rs 5 lakh, the penalty amount will not exceed Rs 1,000.
Until AY 2017-18, there was no penalty for filing belated income tax returns. According to amendments made in the Budget 2017, taxpayers are liable to pay a penalty for filing belated returns. A new section, 234F, was inserted by the government in the Income Tax Act. Till FY 2019-20, an individual would have to pay a late filing fee of up to Rs 10,000 (now reduced to Rs 5,000) for filing ITR after the due dates specified in section 139(1) of the Act. This penalty became applicable from AY 2018-19, i.e., ITR filing for FY2017-18.
- Cannot carry forward loss
If you file a belated return you cannot carry forward losses (except loss from house property). Losses under the following heads of income: Income from business and profession including speculation business, capital gains, and income from other sources, cannot be carried forward in case a belated return is filed by the tax payer. The return filer will not be allowed to carry forward these losses even if all taxes have been paid in time if the return is belated.
- Levy of interest under section 234A
It is important to note that if you have any unpaid tax liability, then penal interest on the same would be leviable, as applicable to your case, till the date of paying the tax liability is still due. But if no tax is payable, the taxpayer won’t be liable to pay this interest solely due to the belated filing of ITR for FY2020-21.
If the income tax department, upon assessing your return, raises demand for additional tax payment then you would have to pay penal interest on that tax as well as the additional tax. Therefore, it is recommended to file your tax return on time.