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Missed tax-filing deadline? Here's what you must know

October 14, 2016 09:00 IST

If you have missed your tax filing deadline, there is not much to fret if your tax dues are fully paid, says Anil Rego

Illustration: Uttam Ghosh/

Rajesh Ashar still cannot believe how he could have been so careless to have missed his tax return filing deadline. In his 14 years of tax filing, this was the first occasion when he had missed on his tax filing deadline.

The government had extended the tax filing deadline by a full month from July 31 to August 5. But the last 15 days before the deadline ended had been awfully hectic for him. In between tending to his son’s fracture and attending a wedding in Chennai, Rajesh also had to juggle an HR offsite, a 5-day trip to Singapore and Hong Kong as well as some ambitious targets set by his boss.

The result was that for the first time in his life, he had actually forgotten to file the tax returns before the deadline.

Rajesh has been trying the Income Tax call centre but they had not been able to help him out. He then approaches a tax lawyer to understand the way out from this situation. The tax lawyer not only offers a solution but also gives some words of caution for the years ahead.

Surely, Rajesh will not be the only assessee who has missed out on the tax deadline. For those who missed the tax filing deadline, here are some key answers and some cautions for the future.

Situation 1: When your taxes are fully paid, but your tax returns are not filed

The first thing you need to remember is that it is necessary for you to file your IT returns even if all the taxes have been already deducted.

Normally, when you work for a company, the employer deducts TDS from your monthly salary and deposits it with the IT department. Despite that, it is essential for you to collect the Form 16 from your employer and file your IT returns before the stipulated date.

However, if your entire taxes are paid, there is no interest payable or penalty levied. In fact, you can just file a delayed return and close the matter.

Let us understand this with a simple example.

The salary received by Rajesh between April 1, 2015 and March 31, 2016 will become his financial year 2015-16 (April 1, 2015 to March 31, 2016).

This corresponds to his Assessment Year 2016-17 (April 1, 2016 to March 31, 2017).

In the current year, the IT department had extended the tax filing deadline by 5 days from July 31 to August 5.

If Rajesh has missed this deadline, then he can still file his returns online and upload the same at any time before March 31, 2018.

Since the taxes are fully paid, he will not be liable for payment of any interest or penalty.

Situation 2: When your taxes are not fully paid and your tax returns are not filed

This can be a slightly more problematic situation for a taxpayer.

When does this situation arise?

Your employer may not have deducted the full amount of tax payable by you as TDS. At times, some expenses and investments claimed by you may have been rejected leaving a gap in your tax payable.

Alternatively, there may be capital gains tax payable by you for sale of shares or property. Any of these situations can result in tax dues at your end.

When you have tax outstanding and fail to file returns then this attracts interest, penalty as well as legal prosecution.

The penalty amount is entirely at the discretion of the tax officer and he can impose a penalty of up to Rs 5,000 depending on the gravity of the case.

Normally, prosecution is very rare but the interest and penalty can add up to quite a bit. In this case, you will have to pay the interest and the penalty and file the ‘Belated Returns’.

There is a small change from the next year for belated returns

Rajesh was fortunate because all his taxes were already deducted in the form of TDS by his employer and his dividends on stocks and mutual funds were anyways tax free. But there is a small change in the Income Tax Act that Rajesh and others need to be aware of.

This change is likely to take effect from the next year (2017-18). From the next year, the time frame for filing belated returns has been reduced from 2 years to just 1 year.

That means if you missed the deadline of July 31, 2017, then you need to file your belated returns within the same assessment year, that is, March 31, 2018.

Extending your belated filing beyond that date will attract penalty and prosecution even if there is no tax outstanding.

But, Rajesh may have still lost out a lot by filing belated returns

One can argue that in case of no tax dues what is the incentive for filing your returns before the deadline when anyways there is not penalty or interest charged.

The reality is that there is a fairly large cost to filing belated returns, even if there is no tax outstanding from your side.

Firstly, belated returns cannot be revised. When you file your returns online, it is highly likely that you may commit some mistakes.

When you file your returns within the stipulated time, you can revise the return and file again. But if you are filing a belated return there is no provision for filing a revised return.

Secondly, if you are filing a belated return, your tax refund will not earn interest and you will only get the actual refund amount irrespective of the delay.

Most importantly, you can claim set-off and carry forward losses only if you file returns within the stipulated date. If you are filing belated returns, then the benefit of setting off losses against profits and carrying forward is not available to you.

In a nutshell, if you have missed your tax filing deadline, there is not much to fret if your tax dues are fully paid. However, the benefits of filing returns on time are substantial.

Ensure to file your returns well before the last date to avoid last minute server delays and website crash problems.

Even if you are likely to miss the tax filing deadline, ensure that your tax dues are fully paid so that you do not attract any penal or legal provisions.

When you file belated returns, you lose out on a number of key benefits. It is, therefore, to ensure that you file your taxes before the stipulated date.

Anil Rego is the founder and CEO of Right Horizons, an investment advisory and wealth management firm that focuses on providing financial solutions that are specific to customer needs.

Anil Rego