Did you forget to pay last year’s ITR?

Taxes | admin | May 2, 2011 at 8:26 am

There are several excuses for not having filed your tax return by the due date (31 July of each year). You were travelling. Or you couldn't find the time from work.

Maybe some documents were missing. Or perhaps you just forgot. Whatever be your reason, the tax department is willing to give you a second chance.

If you have not filed your tax return for 2009-10, you can file it by 31 March 2011 without any penalty.

If all your taxes are paid, there is no penalty for filing late. However, if there is some tax due, you have to pay interest of 1% per month of delay on the amount payable. The interest meter starts ticking right after the end of the financial year.

So, if you have to pay additional tax on income for the year ended 31 March 2010, better pay it right away. If the tax payable is Rs 10,000, along with 11% interest (for 11 months after March 2010), the total payment works out to Rs 11,100 plus a 3% education cess.

You can also file tax returns of two years ago (ie, for 2008-9). This will be treated as a belated return. If some taxes remain unpaid, you will have to pay them along with the penal interest (1% per month of delay). In addition to this, there is a possibility of a penalty of Rs 5,000 for not filing the return by the due date.

Some taxpayers might be tempted to brush the issue under the carpet and start with a clean slate this year. This can be a costly mistake because failure to pay tax by the due date is tantamount to tax evasion.

The Income Tax Department picks up cases for scrutiny at random and if it is discovered that you have unpaid taxes, a penalty of up to 300% of the amount can be slapped on you. The minimum penalty is 100% of the outstanding tax.

If all taxes are paid and there is no penalty for late filing, why is there such a big rush to file tax returns by 31 July? This is because taxpayers who file belated returns forego some of their rights if they wake up late. For instance, you cannot carry forward losses for adjusting against future gains if you file late.

This is especially useful if you have incurred short-term capital losses from investments in stocks. These can be carried forward and set off against short-term or long-term capital gains made in subsequent years. Under current laws, such losses can be carried forward for up to eight years.

The Direct Taxes Code had originally proposed that losses be allowed to carry forward indefinitely. However, it has now reverted to the 8-year limit.

Besides, there is no room for rectifying mistakes. If you have made some calculation error while filling in the form or if some income or exemption escaped your mind at that time, you can file a revised return. You can revise your income tax return for up to two years after it has been filed.

For instance, you can file a revised return for income earned during 2008-9 till 31 March 2011. The previous year's return can be revised till 31 March 2012.

What's more, the return can be revised any number of times – there is no limit. You need to quote the acknowledgement number and date of filing of original return to file a revised one.

So, if you suddenly find that you have not included any income or didn't avail of any tax benefit, file a revised return right away. However, you cannot file a revised return if your return has already been assessed. Also, as mentioned earlier, this window of opportunity is open only to taxpayers who filed their return by the due date.

Source: Economic Times