What happens if I don’t file ITR?

Last Updated at: March 24, 2020
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ITR What happens if I don't file ITR

Ahead of tax season, some of you google tax penalties for delay in filing ITR. Here, we will tell you what can happen if you don’t file ITR. 

Filing an ITR is a way to inform the Government about your income. If you don’t inform the government, you have to face penalties and problems. If you are in the taxable position, then you must file income tax returns. The Income Tax Department has been reminding several times to file Income Tax Returns (ITR). Suppose an individual is missing to file an ITR, it may invite a penalty of up to Rs 10,000. Besides this, a delay or pause in the filing of income tax returns also makes you liable to pay interest on the taxable amount. 

Taxable Income Range (In Rs.)

Tax Rate prior to Budget 2020 (Existing)

Tax Rate Post Budget 2020

0-2.5 lakh Exempted Exempted
2.5-5 lakh 5% 5%
5-7.5 lakh 20% 10%
7.5-10 lakh 20% 15%
10-12.5 lakh 30% 20%
12.5-15 lakh 30% 30%
Above 15 lakh 30% 30%

 

Is it compulsory to file Income Tax Returns?

Yes, it is compulsory to file an income tax return (ITR). If you are not filing ITR, it will not only attract penalties but can also hamper your chances of getting a loan, or a visa for travel purposes or property registration. As per the Income Tax Act, the following are the entities or firms that require the mandatory filing of ITRs in India:

  • People whose gross total income exceeds Rs 2.5 lakh. This limit is Rs 3 lakh for senior nationals and Rs 5 lakh for super senior citizens.
  • Companies or firms are irrespective of whether you have profit or loss during the financial year.
  • Those who want to demand an income tax refund.
  • Those who are in need to carry forward a loss under a head of income.
  • Resident individuals who have an asset or financial interest in an entity located outside India. (Not applicable for NRIs or RNORs) 
  • Residents and signifying authorities in a foreign account. 
  • Those who acquire income from assets or property that is under a trust for charitable or religious purposes or a political party or a research association, news agency, educational institution, infrastructure debt fund, a hospital, any authority, body or trust.
  • International companies are taking advantage of a business in India.
  • Even NRIs (Non-resident Indian) who have income that exceeds Rs. 2.5 lakh which is received or happened in India, is expected to file an income tax return in India.

File income tax returns now

Benefits of filing ITR

  • Easy loan approval
  • Claim tax refund
  • Income and address proof
  • Quick visa processing
  • Carry forward to your losses
  • Avoids penalty

What are the issues faced when ITR is not filed? 

Here are certain things that will happen if you do not file income tax returns on time:

  • Penalty

As we know a penalty is a three-tier fee system that has been introduced for not filing income tax returns within the due date. If a return is filed beyond the due date, then fees payable will be Rs. 5,000, otherwise it will be Rs. 10,000. However, in the case of taxpayers whose annual income does not exceed or surpass Rs. 5,00,000, the fees payable would be restricted to Rs. 1,000.

  • Reduced time for improving your income tax returns

If you are filing an ITR and you are ending up with a mistake, there are certain rules to follows. Earlier, taxpayers has a 2-year long window to review and resubmit an erroneous ITR, which has now been reducing to one year from the end of the financial year. Hence, as soon as you file, the longer would be the window available with you for revising your returns to rectify errors if any.

  • Interest must be paid on the tax amount

When the income tax return is not filed within the due date, the interest at the rate of 1 percent per month or part of the month is levied until the date of filing the income tax return. The stated interest is payable on tax payable after decreasing the TDS ( Tax Deducted at Source ), TCS (tax collected at source), advance tax and other reliefs/ tax credits available under the law. TDS is deducted by the buyer or payer while TCS is collected by the receiver/seller.

  • No carry forward of losses

If ITR is not filed within the due date, the taxpayer will not be allowed to carry forward any loss under the head “ profits and gains of business or profession” or “capital gains”. However, unabsorbed reduction and loss under the head “income from house property” shall be entitled to be carried forward.

  • Delay in the method of return of income

Once the return is filed and verification of the same is duly completed, the central processing centre in Bangalore, of the Income Tax Department, processes the income tax return. It is only then that the tax liability or refund of the taxpayer is defining. Thus, in case the taxpayer is claiming a refund, the delayed filing of the income tax return will result in a delayed receipt of the tax refund. 

Thus, it is advisable for every taxpayer to file an income tax return on time so that we can avoid certain consequences including levy of a mandatory fee.

 

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What happens if I don’t file ITR?

521

Ahead of tax season, some of you google tax penalties for delay in filing ITR. Here, we will tell you what can happen if you don’t file ITR. 

Filing an ITR is a way to inform the Government about your income. If you don’t inform the government, you have to face penalties and problems. If you are in the taxable position, then you must file income tax returns. The Income Tax Department has been reminding several times to file Income Tax Returns (ITR). Suppose an individual is missing to file an ITR, it may invite a penalty of up to Rs 10,000. Besides this, a delay or pause in the filing of income tax returns also makes you liable to pay interest on the taxable amount. 

Taxable Income Range (In Rs.)

Tax Rate prior to Budget 2020 (Existing)

Tax Rate Post Budget 2020

0-2.5 lakh Exempted Exempted
2.5-5 lakh 5% 5%
5-7.5 lakh 20% 10%
7.5-10 lakh 20% 15%
10-12.5 lakh 30% 20%
12.5-15 lakh 30% 30%
Above 15 lakh 30% 30%

 

Is it compulsory to file Income Tax Returns?

Yes, it is compulsory to file an income tax return (ITR). If you are not filing ITR, it will not only attract penalties but can also hamper your chances of getting a loan, or a visa for travel purposes or property registration. As per the Income Tax Act, the following are the entities or firms that require the mandatory filing of ITRs in India:

  • People whose gross total income exceeds Rs 2.5 lakh. This limit is Rs 3 lakh for senior nationals and Rs 5 lakh for super senior citizens.
  • Companies or firms are irrespective of whether you have profit or loss during the financial year.
  • Those who want to demand an income tax refund.
  • Those who are in need to carry forward a loss under a head of income.
  • Resident individuals who have an asset or financial interest in an entity located outside India. (Not applicable for NRIs or RNORs) 
  • Residents and signifying authorities in a foreign account. 
  • Those who acquire income from assets or property that is under a trust for charitable or religious purposes or a political party or a research association, news agency, educational institution, infrastructure debt fund, a hospital, any authority, body or trust.
  • International companies are taking advantage of a business in India.
  • Even NRIs (Non-resident Indian) who have income that exceeds Rs. 2.5 lakh which is received or happened in India, is expected to file an income tax return in India.

File income tax returns now

Benefits of filing ITR

  • Easy loan approval
  • Claim tax refund
  • Income and address proof
  • Quick visa processing
  • Carry forward to your losses
  • Avoids penalty

What are the issues faced when ITR is not filed? 

Here are certain things that will happen if you do not file income tax returns on time:

  • Penalty

As we know a penalty is a three-tier fee system that has been introduced for not filing income tax returns within the due date. If a return is filed beyond the due date, then fees payable will be Rs. 5,000, otherwise it will be Rs. 10,000. However, in the case of taxpayers whose annual income does not exceed or surpass Rs. 5,00,000, the fees payable would be restricted to Rs. 1,000.

  • Reduced time for improving your income tax returns

If you are filing an ITR and you are ending up with a mistake, there are certain rules to follows. Earlier, taxpayers has a 2-year long window to review and resubmit an erroneous ITR, which has now been reducing to one year from the end of the financial year. Hence, as soon as you file, the longer would be the window available with you for revising your returns to rectify errors if any.

  • Interest must be paid on the tax amount

When the income tax return is not filed within the due date, the interest at the rate of 1 percent per month or part of the month is levied until the date of filing the income tax return. The stated interest is payable on tax payable after decreasing the TDS ( Tax Deducted at Source ), TCS (tax collected at source), advance tax and other reliefs/ tax credits available under the law. TDS is deducted by the buyer or payer while TCS is collected by the receiver/seller.

  • No carry forward of losses

If ITR is not filed within the due date, the taxpayer will not be allowed to carry forward any loss under the head “ profits and gains of business or profession” or “capital gains”. However, unabsorbed reduction and loss under the head “income from house property” shall be entitled to be carried forward.

  • Delay in the method of return of income

Once the return is filed and verification of the same is duly completed, the central processing centre in Bangalore, of the Income Tax Department, processes the income tax return. It is only then that the tax liability or refund of the taxpayer is defining. Thus, in case the taxpayer is claiming a refund, the delayed filing of the income tax return will result in a delayed receipt of the tax refund. 

Thus, it is advisable for every taxpayer to file an income tax return on time so that we can avoid certain consequences including levy of a mandatory fee.

 

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