Here we will discuss few of the consequences of non-filing or delay in filing of ITR when you are liable to do so under the Income-tax Act (“the Act”) which will lead to paying higher taxes (including interest, penalty, Delay fees ) or face legal action by the Government:
1. Non-carry forward of losses – In case you have incur losses under the head Capital Gains or Business or Profession and you have not filed your ITR within the due date specified in section 139(1) of the Act, you cannot carry forward the losses to future years and this leads to paying higher taxes on the income you have under the same heads or different heads subject to the inter head set-off conditions.
2. No Refund of excess TDS / TCS – In case, any excess TDS has been deducted or any TCS has been collected by the bank or any entity, the refund of the same can only be claimed by filing the ITR otherwise it will become dead cost for the taxpayer. TCS is mostly collected by the entity on the amount not in the nature of income unlike TDS which is deducted on the amount in the nature of income. Therefore, ITR must be filed in order to get refund of TCS collected.
3. Interest and Delay fees for Delay filing of ITR – In case, the taxpayer does not file the ITR within the due date specified in section 139(1) of the Act, taxpayer is required to bear the interest u/s 234A of the Act @ 1% per month (or part of the month) for the period of delay along with interest u/s 234B of the Act, if liable to pay Advance Tax. Further, taxpayer is also liable to a Delay fees which range from INR 1,000 to INR 5,000 depending upon the range of income.
4. Best Judgment Assessment – In case the taxpayer doesn’t file the ITR within the due date and also within the due date prescribed for be Delayed ITR, the Assessing Officer is empowered to make an assessment to the best of his judgment i.e., the AO will make an estimation of the taxpayer’s income and tax liability based on the information available to him. He may consider factors such as past records, industry standards, comparable cases, and any other relevant information while making assessment.
5. Prosecution under the Act – In case a person is liable to file his ITR but has not filed, then is punishable –
(i) in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds INR 25,000, with rigorous imprisonment for a term which shall not be less than 6 months but which may extend to 7 years and with fine;
(ii) in any other case, with imprisonment for a term which shall not be less than 3 months but which may extend to 11 years and with fine.
6. Non-Disclosure of Foreign Assets including Bank or Foreign Income – In case, the taxpayer possesses foreign assets including bank or earned foreign income or beneficiary of any asset (including financial interest in any entity located outside India) and his residential status is Resident & Ordinarily Resident (ROR) for the relevant financial year, he is mandatorily required to file ITR and disclose his foreign assets / foreign income in the ITR. In case, he has not disclosed or has not filed the ITR, he is liable to a penalty of INR 10 lakhs under The Black Money (Undisclosed Foreign Income And Assets) And Imposition of Tax Act, 2015.
Note – Form 26AS, Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) must be checked by the taxpayer in order to collect information about transactions reported by various entities including the transactions on which no TDS / TCS has been deducted / collected which will enable the taxpayer to evaluate whether he is liable to file ITR or not as per conditions specified under the Act. Further, in case, no transaction is reported and you are aware that your income will exceed the maximum amount not chargeable to tax and you are liable to file ITR, then you should file ITR after consulting a finance professional.
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Disclaimer: This article serves an educational purpose and should not be considered as professional advice. Consultation with a qualified individual is recommended before making any decisions based on the content provided. The author bears no responsibility for any actions taken based on this article.
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