What will happen if I forgot to file ITR? Do you ever wonder what might happen if you didn’t file your Income Tax Return (ITR)? Well, let’s find out. But first, let’s understand what an ITR is.
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What is an ITR?
Definition and Purpose of ITR
The ITR, or Income Tax Return, is a statement of your annual income, the tax applied to it, and the tax paid. It provides a comprehensive account of your income sources and any tax deductions that might apply. Filing an ITR is not merely a legal obligation; it serves an important purpose in the broader context of a nation’s economy.
The Importance of Filing ITR
Filing your ITR showcases your financial discipline and contributes to your nation’s development. Besides, it can also serve as a handy document when you need to validate your income, such as when applying for a loan or a visa.
Consequences of Not Filing ITR
Skipping ITR filing is not as harmless as it might sound. It can lead to several consequences, including penalties and possible imprisonment.
Failure to file your ITR can result in a significant penalty. This penalty varies depending upon the degree of delay and your taxable income. The longer you delay, the heavier the penalty you may have to bear.
Prosecution and Imprisonment
Did you know that not filing an ITR could potentially land you in jail? Yes, under the tax laws, if the unpaid tax amount exceeds a certain limit, you might face prosecution which could lead to imprisonment.
Delay in Refunds
If you are eligible for a refund, you need to file an ITR to claim it. Any delay or failure in filing the ITR will also delay this refund.
Effect on Credit Score
Regular ITR filing reflects positively on your credit score. Conversely, failure to file an ITR can have a negative impact on it, making it harder for you to get loans or credit cards.
How to File an ITR?
You’ve seen the consequences; now let’s understand how to avoid them.
Understanding the Process
To file an ITR, you first need to understand your income sources, calculate your tax liability, and determine the deductions you qualify for.
Gathering Necessary Documents
You will need documents such as your PAN card, Aadhaar card, bank statements, salary slips, and proofs of investments.
Using an Online Platform or Professional Service
ITR can be filed online on the income tax department’s website or with the help of professional services.
Consequences of Late ITR Filing
Even if you file late, it’s still better than not filing at all. However, there are consequences for late filing as well.
Penalties for Late Filing
One of the major consequences of late filing of ITR is that you will have to pay a penalty. Under Section 234F of the Income Tax Act, if you fail to file your ITR within the due date, a late fee of Rs 5,000 will be applicable. However, if your annual income is less than 5 lakh, the late fees would be limited to Rs 1,000.
Interest on Unpaid Tax
As per Section 234A, if you don’t pay your taxes on time, you will be liable to pay an interest of 1% per month on the outstanding tax amount. This interest is calculated from the date you file your return for the relevant financial year till the due date.
For instance, let’s say you owe Rs 2 lakh in taxes for the financial year 2022-2023. The deadline to file your tax return is July 2023, but you end up paying it in March 2024, which is eight months later. In this case, you will be charged Rs 16,000 as interest (2 lakhs × 8%). This interest amount of Rs 16,000 will be added to your tax liability. So, the longer you delay in paying your taxes, the more your tax liability increases.
Any refunds due to you could be delayed if you file your ITR late.
In conclusion, it’s clear that the risks and penalties associated with not filing your ITR, or even filing it late, outweigh the effort it takes to file. So, keep your documents ready and file your ITR on time.
What if I don’t have any taxable income, do I still need to file ITR?
Yes, even if your income is below the taxable bracket, it’s beneficial to file an ITR for record purposes.
Can I file an ITR after the due date?
Yes, you can file a belated ITR but it may attract a penalty.
How can I verify my ITR?
ITR can be verified online via Aadhaar OTP, net banking, or by sending a signed ITR-V to the CPC, Bangalore.
What if I made a mistake while filing my ITR?
You can file a revised return to correct the mistake. However, this needs to be done within the stipulated time frame.
Can I file ITR for previous years?
Yes, but only up to a specific period and it may attract a penalty.