The Alarming Consequences of Not Filing Your Income Tax Return: Are You at Risk?
Are you still waiting to file ITR on the last day fixed for filing ITR ? Are you the person who prioritises ITR filing over other chores on the last date?
But have you ever thought what will happen if a taxpayer does not file an income tax return ??
Actually, there are various consequences for not filing an ITR. I will try to make you familiar with the effect of not filing your income tax return at all or within due date.
Individuals having an annual income not exceeding Rs.2.5 lakhs are not required to file an ITR except in certain cases. So if total income of an individual does not exceed Rs.2.5 lakhs and the exceptions are not applicable to them, there will be no consequences of non-filing.
The tax department may ask you to file u/s 142(1) even if ITR is not required to file as per the above provision.
In case of failure to file ITR when it’s required or u/s 142(1) below Penalty and Interest may be attracted:
Interest @1% u/s 234A shall be recovered if any unpaid tax liability for the respective year and are filing return beyond due date (i.e belated return).
Penalty amounting to Rs.5000/- u/s 271F may be imposed by the tax department not filing of ITR timely.
Following Penalty provisions may also attract –
If an individual fails to file ITR by the due date ( i.e 31st July or 30th Sep), but return is filed within 31st Dec following late fees shall be applicable :
• Individuals earning a gross income of up to ₹ 2.5 lakh are exempt from any penalties.
• Individuals earning a gross income between ₹ 2.5 lakh and ₹ 5 lakh will incur a penalty of ₹ 1,000.
• Individuals earning a gross income exceeding ₹ 5 lakh will be liable for a penalty of ₹ 5,000.
Example: ITR filed on 30 Nov 2024 then the penalty amount shall be Rs. 5000/- if your income exceeds Rs. 5 lakhs or Rs. 1000/- if your income is below Rs. 5 lakhs.
Non filing of ITR may attract Notice – Sec 142(1)
If ITR is not filed or due date missed, then the Income Tax Department can ask to furnish it through a notice under section 142(1).
Sec 144 – Best Judgement Assessment
In case ITR is not filed, Income Tax Department may assess income and proceed with the computation of tax liability in the manner as deemed fit by the income tax officer. And, a notice for best judgement assessment shall be served upon. This is to give a fair chance to explain the unavoidable reasons for the delay or non-filing of income tax return.
Difficulties in loan approval, credit card and other credit facilities
Wherever filed ITR becomes a documentary need for the process of loans, credit card or other credit facilities, Individual may face a situation due to non-filing of ITR.
Loss of Refunds and Deductions:
By not filing tax returns, the opportunity to claim refunds and deductions that could reduce tax burden shall not be available. This results in missed opportunities to optimize your tax planning.
Opportunity to carry forward of losses
Carry forward of losses for the current year shall only be available if income tax return is filed.
Many a times a taxpayer thinks that if taxes are already paid no need to file income tax returns or similarly if post deduction of investment income becomes lower than Rs. 2.5 lakhs no need to file ITR. Paying taxes or making adequate investments never relieves from filing of ITR within due date
We suggest please make sure filing of ITR within due date to escape from above consequences.
