All individuals must be aware of filing the Income tax return but during the ITR season, some people intentionally or mistakenly skip filing the Income tax return because they miss the due dates or don’t want to pay appropriate taxes to the government or anything.
Let’s first understand who needs to mandatorily file the Income tax return:
- People with a Gross total income above 2.5 lakhs (in case of citizens with age more than 60 years the limit is 3 Lakhs and for those above 80 years it’s 5 Lakhs)
- Individuals with annual sales or turnover of Rs. 60 Lakhs or more
- If the professional income exceeds Rs. 10 Lakhs during the year
- If TDS or TCS deducted is Rs. 25000 or more (Rs. 50000 in case of senior citizens)
- If the deposits in one or more saving accounts during the previous year is at least Rs. 50 Lakhs
- If the deposits in one or more current accounts maintained with a bank or co-operative bank exceed Rs. 1 crore.
- Individual who has spent Rs. 12 Lakhs or more on foreign country travel
- Individual who has paid electricity bill exceeding Rs. 1 Lakhs (single or aggregate) during a financial year
- If the individual is having income from foreign sources
- If the individual is having any asset (including financial interest) in an entity located outside India.
After knowing the cases for filing the Income tax return now let’s discuss what will happen if you do not file the ITR on time:
- Penalty and interest: If the return is filed after the due date then you need to pay late fees which can range from Rs. 1,000 to Rs. 10,000 depending on the amount of Taxable income. Interest is also applicable on the tax amount at the rate of 1% per month until you filed your ITR.
- No carry forward of losses: The taxpayer will not be able to carry forward the losses (Business loss or capital gain loss) or claim the benefit of deductions if the ITR is not filed (except loss from House property).
- Penalty/Prosecution: Not filing the ITR can attract serious consequences also in terms of penalty and prosecution. The income tax department can consider it as a tax evasion motive and they have the power to levy a penalty on account of under-reporting of income which will be 50% of the tax avoided. They can also initiate prosecution wherein the taxpayer may be subject to imprisonment for a term of minimum of 3 months to 2 years along with a fine depending upon the amount.
- Loan applications: Loan applications can be complicated due to the non-filing of Income tax returns as almost all the banks require income declarations to know the financial capabilities of a person. Therefore, an Income tax return is of utmost importance if you need to obtain a loan.
- Best Judgement assessment (Section 144): Non-filing of ITR can result in a Best judgment assessment by the Income-tax authority which is done by Income tax officers on the basis of all relevant material he has gathered.
The best judgment assessment is made in below cases:
- If a taxpayer failed to file the return within the due date
- If a taxpayer fails to comply with a notice under section 142A
- If a taxpayer fails to comply with all the terms of notice under section 142 (2A)
- Refund of taxes: In case the tax payable is less than the tax deducted then the taxpayer can claim a refund of such excess amount but if the return is not filed then the chances of getting a refund will not be there.
One must note that Non-filing of Income tax returns is a serious offense and non-compliance with it can attract huge penalties. Hence, a taxpayer must file his/her return within due time to avoid such consequences.
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