Rs 5000 Penalty If You Don't File Income Tax Returns By July 31; Rs 1000 Fine Even If Zero Tax Payable

The Income Tax Department has reported that over five crore income tax returns (ITRs) have been filed as of July 26. However, many taxpayers are experiencing difficulties with the tax filing portal, putting them at risk of missing the crucial July 31 deadline. Despite these issues, the tax department is unlikely to extend the deadline.

What Happens If You Miss the July 31 Deadline?

Missing the July 31 deadline for filing an Income Tax Return (ITR) can result in significant consequences for taxpayers:

1. Penalties for Late Submission:
   • Under Section 234F of the Income Tax Act, 1961, a penalty of Rs 5,000 is imposed for late filing.
   • For taxpayers with a taxable income of Rs 5 lakh or less, the penalty is capped at Rs 1,000.
   • This penalty applies even if the belated ITR shows zero tax payable. Taxpayers must include the challan information for the late filing fee in their belated ITR form.
2. Mandatory ITR Filing Conditions:
   • Some taxpayers must file an ITR even if their income is below the basic exemption limit. This applies if they meet any of the following criteria:
     • Spent Rs 2 lakh or more on travel abroad for themselves or others.
     • Paid Rs 1 lakh or more on electricity bills during the financial year.
     • Deposited Rs 1 crore or more in current accounts.
     • Met other prescribed conditions.
3. Loss of Benefits and No New Tax Regime Option:
   • Late ITR filings not only incur penalties but also result in the loss of benefits such as carrying forward losses from capital gains and business income.
   • Taxpayers cannot opt for the new tax regime if they file a belated ITR for Assessment Year 2024-25.

Who Must Pay a Penalty?

Penalties apply under the following conditions:

1. Income Exceeds Basic Exemption Limit:
   • A penalty applies if taxable income exceeds the basic exemption limit.
   • The default tax regime exempts income up to Rs 3 lakh for all taxpayers, while the old regime’s exemption limit varies based on age.
2. Mandatory ITR Filing Conditions:
   • Even if income does not exceed the exemption limit, penalties apply if mandatory filing conditions under Section 139(1) of the Income Tax Act are met.

Filing ITR After July 31

To file a belated ITR, taxpayers must select Section 139(4) in the form instead of Section 139(1), which is used for on-time filings. In addition to the penalty, taxpayers must pay penal interest on any outstanding tax when filing a belated ITR.

No Penalty for Some

Taxpayers whose taxable income is below the basic exemption limit can file their ITR late without incurring a penalty. However, they must still file to receive any potential tax refund.

Conclusion

With over five crore ITRs filed by July 26, the pressure is on for taxpayers facing portal issues. Missing the July 31 deadline can lead to penalties and loss of benefits, emphasizing the importance of timely and accurate ITR filing.

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