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

The Finance Bill 2024, introduced in the Lok Sabha, seeks to implement the financial proposals of the Central Government for the fiscal year 2024-25. This bill includes a variety of significant amendments to the existing tax laws, aiming to address current economic challenges and streamline tax administration. Below, we highlight the key components and changes proposed in this important legislative document. 

The Finance Bill 2024, presented by the Finance Minister Nirmala Sitharaman, aims to give effect to the financial proposals for the year 2024-25. The bill encompasses a broad range of amendments to direct and indirect taxes, reflecting the government’s commitment to fostering economic growth and enhancing fiscal stability.

2. Income Tax Amendments

The bill introduces several changes to the Income-tax Act, focusing on various sections to improve tax compliance and administration. Key amendments include:

• Section 2: Definitions, particularly the definition of ‘dividend,’ have been revised.
• Section 10, 11, 12A, and 12AB: Amendments to provisions related to income exclusions and exemptions.
• Section 37 and 40: Modifications in allowable deductions and disallowances.

3. Corporate Tax Adjustments

Adjustments to corporate tax regulations are another crucial aspect of the Finance Bill 2024. These include:

• Section 115BAC: Changes in the alternative tax regime for individuals and Hindu Undivided Families (HUFs).
• Section 115QA: Adjustments concerning tax on distributed income by domestic companies.

4. Enhancements in Tax Deduction and Collection

The bill proposes enhancements to the tax deduction at source (TDS) and tax collection at source (TCS) mechanisms:

• Section 194: TDS on dividends and other specified payments.
• Section 194-O: Provisions for TDS on payments by e-commerce operators.

5. Amendments to Indirect Taxes

In the realm of indirect taxes, the Finance Bill 2024 seeks to streamline GST and customs duties:

• Central Goods and Services Tax (CGST): Amendments to sections 9, 10, and 16 to clarify the applicability and administration of GST.
• Customs: Changes in sections 25 and 28 to enhance the efficiency of customs duty collection and compliance.

6. The Direct Tax Vivad se Vishwas Scheme

A noteworthy inclusion is the Direct Tax Vivad se Vishwas Scheme 2024, which aims to resolve pending tax disputes amicably. This scheme outlines:

• Declarations: Procedures for filing declarations and payment of disputed taxes.
• Immunity Provisions: Conditions under which taxpayers are granted immunity from penalty and prosecution.

The Finance Bill 2024 represents a comprehensive effort by the Indian government to refine the tax structure, promote compliance, and boost economic growth. By addressing both direct and indirect taxes, the bill aims to create a more equitable and efficient tax system.

This overview encapsulates the essence of the Finance Bill 2024, highlighting the critical changes that taxpayers and businesses should be aware of. As the bill progresses through the legislative process, further details and refinements are expected, which will be crucial for stakeholders to understand and adapt to the new tax landscape.

Download Full article is here

Visit to know more about finance bill : www.gorantlaassociates.com

The Finance Bill, 2024, introduces several amendments to the Income-tax Act, 1961, and other related acts to continue the reform process in the direct tax system. These reforms aim to provide tax reliefs, simplify the tax structure, and rationalize various provisions. The amendments are categorized into different sections to address various aspects of taxation.

Key Amendments and Provisions

1. Rates of Income-Tax

   The Finance Bill specifies the income-tax rates for the assessment year 2024-25 for different categories of taxpayers, including individuals, Hindu Undivided Families (HUFs), and companies. Notably, the bill maintains the existing tax rates for most categories without any changes.

   • Individuals and HUFs:
     • Up to ₹2,50,000: Nil
     • ₹2,50,001 to ₹5,00,000: 5%
     • ₹5,00,001 to ₹10,00,000: 20%
     • Above ₹10,00,000: 30%
   • Senior Citizens (60-80 years):
     • Up to ₹3,00,000: Nil
     • ₹3,00,001 to ₹5,00,000: 5%
     • ₹5,00,001 to ₹10,00,000: 20%
     • Above ₹10,00,000: 30%
   • Super Senior Citizens (80 years and above):
     • Up to ₹5,00,000: Nil
     • ₹5,00,001 to ₹10,00,000: 20%
     • Above ₹10,00,000: 30%
   • Domestic Companies:
     • If turnover ≤ ₹400 crores in FY 2021-22: 25%
     • Others: 30%
   • Firms and Local Authorities: 30%
2. Surcharge and Cess
   • Surcharge:
     • Income exceeding ₹50 lakhs but not exceeding ₹1 crore: 10%
     • Income exceeding ₹1 crore but not exceeding ₹2 crores: 15%
     • Income exceeding ₹2 crores but not exceeding ₹5 crores: 25%
     • Income exceeding ₹5 crores: 37% (restricted to 25% for incomes under sections 111A, 112, and 112A)
   • Health and Education Cess: 4% on the income-tax including surcharge
3. Deductions at Source (TDS)
   • The rates for TDS on various incomes remain largely unchanged, except for non-domestic companies, where the rate is reduced from 40% to 35%.
   • Specific rates for long-term and short-term capital gains for non-residents are outlined, with increases in TDS rates for transfers occurring on or after July 23, 2024.
4. Measures to Promote Investment and Employment
   • Various incentives and reliefs are provided to promote investments and employment generation. These include accelerated depreciation, investment allowances, and tax holidays for specific sectors.
5. Simplification and Rationalisation
   • The bill aims to simplify the tax compliance process by rationalizing provisions and reducing ambiguities. This includes clarifications on various tax treatments and streamlining documentation requirements.
6. Widening and Deepening of Tax Base
   • Efforts are made to widen the tax base by bringing more taxpayers under the tax net and reducing tax evasion. This includes stricter enforcement of tax compliance and enhanced reporting requirements.
7. Tax Administration
   • Improvements in tax administration are proposed to make the tax system more efficient and taxpayer-friendly. This includes the use of technology for better service delivery and faster processing of refunds and assessments.

The Finance Bill, 2024, continues the government’s efforts to reform the direct tax system in India. By maintaining existing tax rates, providing reliefs, and simplifying procedures, the bill aims to make the tax system more transparent and efficient. Taxpayers are encouraged to understand these changes and comply with the new provisions to benefit from the reforms introduced.

Download Full PDF

This article provides a comprehensive overview of the key amendments and provisions in the Finance Bill, 2024, covering aspects such as tax rates, surcharges, TDS, and measures to promote investment and employment. Understanding these changes is crucial for effective tax planning and compliance.

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