ITR Deadline, Penalties, and More: All You Need to Know

July is a significant month for taxpayers on an individual basis. The deadline to submit income tax returns for the fiscal year 2023-24, also known as the assessment year 2024-25, is July 31.

Taxpayers must grasp the significance of adhering to the due date and promptly submitting tax returns. Here are some important factors to consider when filing your income tax return (ITR), the significance of meeting the deadline, and the possible repercussions of not doing so.

What is the ITR?

A tax return is a form that individuals send to the income tax department, providing details of their earnings, expenditures, and other financial information for a specific fiscal year. Submitting an income tax return enables the authorities to evaluate your tax obligations and verify that you have reported your income accurately and paid the appropriate taxes.

What is the reason for filing your ITR before July 31st?

Filing your ITR before the deadline is critical for multiple reasons:

Timely refunds: Throughout the financial year, you might have earned income from various sources where tax was deducted by the payer as required by tax regulations. Filing your taxes early ensures that if you're owed a tax refund, you'll receive it promptly.

Avoid late-filing fee: If you submit your return after the deadline, you'll not only face extra interest on unpaid taxes but also a late filing fee. According to Suresh Surana, a practicing chartered accountant, this late fee can amount to Rs 5,000 under Section 234F if the return is filed after the due date specified in Section 139(1). However, if your total income is less than Rs 5 lakh, the late filing fee is capped at Rs 1,000.

Avoid penalties and interest: If you don't file your tax return by the deadline, you could face penalties and interest charges on any unpaid taxes. According to Suresh Surana, a practicing chartered accountant, this means you might have to pay a simple interest rate of 1 percent for each month or part of a month starting from August 1 until you submit your return. If you fail to file any return at all, similar charges may apply.

No carry-forward of losses: Another important thing to keep in mind is that failing to file your ITR by the deadline could prevent you from carrying forward losses, such as those from selling stocks or mutual fund units, to future years. In simpler terms, if you file your return late or make amendments later, you won't be able to use those losses to offset your income in the following years.

Facilitate loan approvals: Submitting your ITR on time is often necessary for obtaining loan approvals, as it validates your income.

Belated tax return: If you don't file your return by July 31, you can still submit it late, known as a belated return. This can be done up to three months before the end of the relevant assessment year.

For instance, if you miss filing your FY 2023-24 return by July 31, 2024, you have until December 31, 2024, to file a belated return. However, keep in mind that filing late incurs a penalty, and you may lose certain benefits like the ability to carry forward losses.

Updated ITR: An updated return allows taxpayers to correct errors or add information that was initially omitted in their original or belated tax filings. This option is typically available for up to two years after the end of the relevant assessment year.

For example, for the financial year 2023-24, which corresponds to the assessment year 2024-25, an updated return can be filed until March 31, 2027.

However, it's important to note that filing an updated return cannot reduce your tax liability. In other words, you cannot use it to lower your taxable income or reduce taxes owed compared to what was declared in the original return. The primary benefit of filing an updated return is to correct mistakes or omissions to avoid penalties or legal issues that may arise from incomplete or inaccurate initial filings, especially when income was not disclosed.

Which documents are required for submitting ITR?

Before you file your ITR, make sure you have these documents ready: Form 16 (from your current employer and any former employers if you changed jobs during the year), PAN Card, Aadhaar Card (ensure PAN-Aadhaar linkage), proofs of investments (like bank deposits, PPF contributions, etc.), home loan interest certificate, and receipts for insurance premium payments.

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