From penalty to imprisonment; here are the consequences of not filing ITR

Income Tax Return (ITR) filing is an annual activity seen as a duty of every responsible citizen of the nation. A person can claim the refund of the excess tax paid/deducted during a financial year by filing ITR for that year.

Generally, taxpayers are required to file ITR by July 31 of any year (unless extended by government). In case taxpayers miss this deadline, they can still file belated ITR with certain penalty charges, as per section 234F of the Income Tax (I-T) Act.

Taxpayers are required to pay Rs 5,000 if return are furnished on or before the December 31 of the assessment year. The penalty increases to Rs 10,000 if the asseesee files the return next year between January 1 and March. Besides this, a delay in filing ITR also makes one liable to pay interest.

The Central Board of Direct Taxes (CBDT) has recently extended the last date for filing Income Tax Returns (ITR) for FY2019-20 (AY2020-21) to November 30, 2020. This was done in view of the constraints due to the COVID-19 pandemic and to further ease compliances for taxpayers.

Now, in case an assessee doesn't file ITR at all, he/she will not be able to carry forward the losses of current assessment year.

"While there may be multiple reasons for failure or delay in filing ITR including non-availability of relevant documents, information and personal exigencies, the Income Tax Act, 1961 lays down stringent consequences if the deadline is not met, regardless of the reason," says Sonam Chandwani, managing partner at KS Legal & Associates.

According to Gopal Bohra, Partner, NA Shah Associates, a penalty may be levied which is minimum 50 percent of assessed tax or maximum 200 percent of the assessed tax.

Assessee may have to face prosecution also (i.e. rigorous imprisonment for a term up to 7 years and fine), in extreme and high value cases, adds CA Anuj Jain, co-founder, Green Portfolio Private Limited.

This happens when wilfull default to furnish the return of income and tax payable (after reducing taxes paid and TDS) exceeds Rs 10,000.

"In case of companies not filing ITR, the principal officers of the firms including directors, will be punishable with rigorous imprisonment and a fine, irrespective of whether any tax is payable by the company," Chandwani explains.

Here, the interest is computed till the month in which the concerned tax officer completes the assessment.

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