With the end of the financial year 2023 – 24 fast approaching, taxpayers are again being warned of the deadline for submission of Income Tax Returns (ITRs). These penalties are not limited to monetary fines alone; corporate entities also lose certain tax incentives if this deadline is not met.
As provided under the Income Tax Act, specific parties include individuals, companies among others, are expected to file their ITRs once a year as a declaration of income earned and taxes paid to the government. The importance of not missing this cannot be downplayed given the consequences that range from fines to the loss of crucial tax incentives.
As per section 234F of the Income Tax Act, penalties are there for filing returns after the due date. Currently, a penalty of Rs 5000 is incurred for filing returns after the specified due date, except for the individuals whose taxable income is less than Rs 500000 and they are charged a penalty of only Rs 1000. In addition, interest penalties can be claimed under sections 234A/B/C where payments are made after the due date, or where advance tax payment is made later than required and in instalments.
This is one major effect of missing the deadline since one can no longer opt for the old tax regime. Tax payers filing their returns after the due date find themselves bound to accept the new tax laws wherein they lose the rights to claim the exemptions allowed under the previous laws.
Furthermore, those who file their returns late lose the ability to transfer capital losses to future years, causing higher taxes to be paid; later on. Setting the record straight on this is Dr. Suresh Surana, the Founder of RSM India, he notes that while capital losses can be utilized to reduce capital gains within the year, it is unlawful to hold forward capital loss beyond eight years.
Every common taxpayer should know the difference between the Financial Year (FY) and the Assessment Year (AY). The financial year refers to the year in a business or other endeavor in which income is earned whereas the assessment year refers to the year in which the ITRs for the financial year are filed. For example, the income you earn in the FY 2023-24 shall be taxed in the AY 2024-25.
Taxpayers are strictly advised to file their ITRs in the soonest possible time to avoid penalties as well as secure the available tax incentives. You should bear in mind that missing the deadline does not only affect current revenue expenditures but also extends its effect on taxes and benefits in the future.