Have you ever wondered, “What will happen if I do not file my income tax return?” If so, you’re in the right place. This article will help you understand the penalties for not filing an ITR and its various aspects. It will explain the consequences of not filing an ITR and what to do if you miss the ITR filing due date.

Failing to file your return can have various consequences under sections 234A, 271A, and 234F. Read on to find out what these consequences are.

Contents

1. What is an ITR and Why is it Necessary?
2. Consequences of Not Filing ITR
3. Why Should You File Your ITR?
4. Frequently Asked Questions

What is an ITR and Why is it Necessary?

An ITR is a document that needs to be filed with the Income Tax Department of India as a declaration of an individual’s income and assets. This information is used to compute the income and the tax liability of an individual. In India, you must file an ITR under the following circumstances:

• If your total income exceeds the tax-free threshold based on your age.
• When seeking an income tax refund.
• If you’ve earned from or invested in foreign assets during the fiscal year.
• For companies or firms, regardless of profit or loss.
• If you’ve incurred losses in business/profession or under capital gains and wish to carry them forward to subsequent years.
• If you’ve deposited a cumulative amount of Rs 1 crore or more in one or more current accounts with a bank.
• Upon depositing over Rs 50 lakh in your savings bank accounts.
• If your foreign travel expenses exceed Rs 2 lakh.
• When yearly electricity expenditure surpasses Rs 1 lakh.
• If tax deducted at source (TDS) or tax collected at source (TCS) exceeds Rs 25,000 (or Rs 50,000 for senior citizens).
• When business turnover exceeds Rs 60 lakhs.
• If income from your profession exceeds Rs 10 lakhs.

Consequences of Not Filing ITR

If you fail to file your ITR, you might have to pay a penalty for not filing an ITR. Below are the consequences of not filing ITR:

Penalty and Interest

One of the major consequences is the penalty charge for non-filing of ITR.

• Under section 234F, a penalty of Rs.1000 is leviable on income up to Rs.5 lakh and a penalty of Rs.5,000 is levied on income above Rs.5 lakh.
• Under section 234A, failing to file income tax return attracts interest at 1% per month on the outstanding tax amount. This interest amount is calculated from the due date of filing the ITR to the date when the ITR is filed.

Penalty under Section 271H

In addition to the above, if you fail to file your TDS/TCS returns, you might have to pay a penalty ranging from Rs.10,000 to Rs.1,00,000. It might also attract a penalty of Rs.200 per day till the date TDS/TCS is paid.

If you fail to file your ITR by the due date, you can file a belated return. However, it might come with notices, late fees, and penalties. Given below are the penalty provisions:

• If your total income is less than or up to Rs.5 lakh, the maximum penalty levied on you will be Rs.1,000.
• A penalty of Rs.5000 will be charged on income above Rs.5 lakh if you were required to file an ITR but fail to do so by the due date, i.e., 31st July or 30th September. This penalty will be applicable only if you file till 31st December.

Example:

If your income exceeds Rs. 2.5 lakhs for AY 2023-24, you were required to file an ITR by 31st July 2024. But if you file your ITR on 31st October 2024, the penalty amount shall be Rs.5000 if your income exceeds Rs.5 lakh or Rs.1000 if your income is below Rs.5 lakh.

Loss of Benefits

• Carry Forward of Losses: If you have incurred business or capital losses, you cannot claim them against future profits if you haven’t filed your ITR on time. This can disadvantage you in future tax filings.
• Processing of Refunds: If you haven’t filed your ITR, the processing of any tax refunds you may be eligible for can be delayed or even rejected.

Proof of Income

Unlike salaried workers with regular pay slips, freelancers and self-employed individuals rely on tax returns to provide the most dependable verification of their income. Without filing an ITR, you might face difficulties if you need to submit income proof for some reason.

Loan and Visa Application

When applying for a loan or visa, lenders and embassies often require the last three years of Income Tax Returns (ITR) to verify your financial standing and eligibility. Submitting these documents demonstrates your financial history and strengthens your application. If you don’t file your ITR, these applications may get rejected.

Prosecution for Not Filing ITR

Not filing your Income Tax Return (ITR) can lead to serious consequences, especially if you owe more than Rs. 25,000 in taxes. In such cases, you could face imprisonment for 6 months to 7 years and a fine. Even if you owe less than Rs. 25,000, failing to file can still result in imprisonment for 3 months to 2 years and a fine.

Why Should You File Your ITR?

Here are a few reasons why ITR filing is important:

• Tax Refunds: Individuals earning less than Rs 5 lakh annually can reclaim all deducted taxes by filing their tax returns before the July 31 deadline.
• Legal Consequences: Failure to file tax returns may prompt the income tax department to issue a notice, leading to substantial penalties and taxes despite reminders.
• Loss Carryforward: Filing tax returns promptly enables individuals to carry forward losses from business or capital gains, thereby reducing future tax liabilities.
• Income Verification: For freelancers and self-employed individuals without official income statements like salaried employees, filing tax returns serves as the most dependable method to validate income.
• Loan and Visa Applications: Submission of the last three years’ ITR is mandatory for loan or visa applications. Furnishing tax returns from previous years aids lenders or embassies in verifying financial status and eligibility.

Choosing to ignore your income tax return (ITR) filing can lead to significant financial and legal repercussions, but you don’t have to face these challenges alone. Secure a hassle-free, compliant, and efficient income tax return filing experience by consulting with an expert.

With Cogent Professionals get your taxes done early and enjoy peace of mind.

Visit us at www.cogentprof.com Contact us via email at [email protected] or give us a call at +91 86961 99999