Have you never filed your income tax returns before? Don’t lose time and start now is the advice from a personal tax expert.
With the July 31 deadline for filing income tax returns (ITRs) for financial year 2017-18 (assessment year 2018-19) still more than a month away, Alok Agrawal, tax partner, Deloitte India says now is a good time to start the tax filing process. Excerpts from an interview:
Is there a solution for people who’ve never filed their tax returns before?
No matter one’s past record, it is never too late to start filing tax returns as there are several consequences to the failure in filing tax returns. Depending upon the individual’s taxable income and extent of delay in filing returns, one has to pay a mandatory “fee” of Rs1000/Rs5000/Rs10,000 which will be applicable for delays in filing tax returns for FY2017-18 onwards; the penalty of Rs 5,000 which was applicable in the past was not levied in all cases.
Under the tax law, taxpayers can only file a belated tax return, that is a tax return filed after the filing deadline, by 31st March of the “assessment year” ( the year following the financial year). Even if a taxpayer has missed this deadline for a belated tax return, it is advisable to deposit the outstanding taxes into the Government treasury along with applicable interest.
What if an individual feels their expenses don’t leave them with enough to actually pay taxes on? Should they still file their return?
While appropriate taxes are deducted by employers from salary payments and employees generally don’t need to bother about that part, prudent financial management demands that individuals budget well in advance for their estimated annual tax liability on other personal income (bank interest and rental income, for example) just as they would budget for their living expenses.
As far as the requirement to file a tax return is concerned, it is mandatory to file the income tax return where the gross taxable income (before allowing tax deductions such as the deduction under Section 80C) exceeds Rs 2,50,000. This limit is Rs 3,00,000 for senior citizens (who are more than 60 years old but less than 80 years old) or Rs 5,00,000 for “super senior“ citizens (who are more than 80 years old).
Also, with India’s progressive tax rates, a system where tax rates increase with increase in income, effective tax rates are fairly low for the lower income taxpayers. For example, the tax rate up to taxable income of Rs 5 lacs per annum is only 5% and a rebate (deduction from income tax) is available under section 87A of upto Rs 2,500 to resident individuals whose taxable income does not exceed Rs 3, 50,000).
What consequences can one have to face if they don’t file their returns on time?
Apart from the mandatory penalty payable by taxpayers for late filing, there could be other implications too. An interest of 1% on the balance tax payable for each month of delay in filing a tax return will be levied on the taxpayer. Also in the case of a belated filing of returns, the taxpayer loses their ability to carry forward certain losses in business to the next assessment year. Not only that, the taxpayer will further lose out on claiming any refund of any excess taxes paid and consequential interest if the time limit for filing a belated return has lapsed.
Apart from this, proof of having filed tax returns may also be required as documentary evidence for visa applications or for bank loans etc.
Are there also any legal implications to failure in filing ITRs?
There may be penalties under the Black Money Act for an individual who is “resident and ordinarily resident” under the Indian tax law and has/had either foreign income or foreign assets. In case of serious wilful attempt to evade taxes, rigorous imprisonment may be considered by the tax authorities which may extend to 7 years.