Missed the Income Tax Return (ITR) Filing Deadline? You Have ITR-U to Fall Back On

If any of the following conditions are satisfied during the relevant financial year, then, as per the Income Tax Act, 1961, one must file an ITR:

Income before specified deductions and exemptions exceeds the basic exemption limit, i.e., ₹2.5 lakhs for those within 60 years of age;

Who has incurred electricity expense of more than ₹1 lakh;

Who has deposited an amount exceeding ₹1 crore in one or more current accounts in a bank or banking company;

Who has incurred more than ₹2 lakhs for themselves or any other person on travel to any foreign country;

A resident Indian having assets outside India, or a beneficial interest therein, or having signing authority in any account located outside India, etc.

Companies and firms have to file an ITR regardless of whether they earn taxable income in the assessing year or not.

The legal implications of missing the deadline to file your income tax return can be significant. Taxpayers are susceptible to consequences like:

Penalties and Fees

Taxpayers who fail to file their income tax returns by the due date will be liable to pay a fine, which depends on the delay in the filing.If the return is filed after the due date but before December 31st of the assessment year, then a late filing fee of up to ₹5,000 can be levied. If the return is filed after December 31 of the assessment year, then the fee amount may increase to ₹10,000.But if a taxpayer's total income does not exceed five lakh rupees, the penalty levied will be up to ₹1,000.However, this is the least severe consequence.

Interest On the Tax Due

Along with penalties, individuals may be liable to pay interest on the outstanding amount at the rate of 1% per month on the outstanding taxes. If ITR is not filed by the due date, then Sections 234B and 234A will be levied, resulting in a 2% interest per month on the unpaid tax amount.

No Carry-Forwarding Of Losses

Failure to file a return may also result in an inability to carry-forward of losses under the business/profession and capital gains head for set-off in future years.

Prosecution

In extreme situations, non-compliance with the Income Tax Act provisions may result in legal implications, like prosecution.An individual can face imprisonment for a minimum of three months, which can be extended to seven years, with a fine depending on the amount of tax evaded. However, imprisonment provisions do not get attracted where the unpaid tax dues are up to ₹10,000.

You can always file a belated return until December 31 of the relevant assessment year, however, even if you have not filed your ITR with them, it would be wise that you do so now. But how?

The ITR-U is a provision that gives taxpayers who missed filing returns by December 31 of the assessment year another opportunity to file their income tax returns.

Filing an updated ITR can help you avoid severe consequences, like imprisonment. While an ITR-U doesn’t exempt you from paying taxes or interest on the outstanding amount, it can reduce your potential liabilities.

Taxpayers can now file an ITR-U for the following years:

The income earned during the financial year 2021-22 is filed in the assessment year 2022-23 until March 31, 2023. Taxpayers can file an ITR-U for the assessment year 2022-23 until March 31, 2025.

For the income earned during the financial year 2022-23, taxpayers can file an ITR-U for the assessment year 2023-24 until March 31, 2026.

But filing an ITR-U also incurs penalties on taxpayers.

If the taxpayer files an ITR within 24 months from the end of financial year, an additional tax of 25% will be charged on the tax amount.

If the ITR-U is filed beyond 24 months but within 36 from the end of financial year, then this additional tax goes to 50% of the tax amount not paid.

Failing to file an Income Tax Return on time can have significant repercussions, where taxpayers face steep penalties and interest charges that can affect their financial health. The loss of refunds and the inability to carry forward losses can cause problems and create burdens on their future income. Not to forget, non-compliance with tax laws can raise red flags with the authorities.

ITR-U offers a crucial way out for those who have missed the filing deadline, allowing them to rectify errors and reduce penalties for late filing.

This proactive and diligent approach to filing an ITR can help with an individual's financial well-being.