Primer on Belated Returns

Now that the extended last date for filing your Income tax returns for the year 2011-2012 is over on 31st August 2012 , what options do people who have missed the deadline have?

How about filing the returns now after the due date?

Here are the details:

People who have missed the deadline can file their returns anytime before the end of the current assessment year (i.e 31st March 2013). However, they may have to shell more money to the tax department as a penal interest for having missed the deadline:

If, for example, Mr.G (who has a net tax payable of Rs.15000) files the tax return on 2nd October, he has to pay a penal interest of 1% on the tax payable for the period between the last date of filing and his date of filing. (Note that even a fraction of the month is regarded as one full month for the purpose of calculating interest).

Therefore, the tax payable = Rs.15000 + (1%*3months*15000)= Rs. 15450.

Lets now discuss on the tax implications of filing the tax returns after the end of the assessment year.

Where an assessee has filed his return ONLY after the end of the assessment year, then apart from the interest on tax payable by him a penalty of Rs.5000 will also be levied for the delay in filing of his returns.

Note:

1. For the purpose of Interest calculation @ 1% , even a fraction of the month will be regarded as one full month and the interest will be calculated accordingly.

2. Penalty of Rs.5000 is leviable for late filing even when there is no tax payable on the part of the assessee. That is, if an assessee wants to file a Nil Return after the end of assessment year, he is liable to pay a penalty of Rs.5000 irrespective of the fact that there is no tax payable by him.

Mr.A who has a tax payable of Rs.15000 for the previous year 2011-2012, has missed the deadline for filing the IT return which ended on 31st Aug 2012. Suppose he files his returns only on 1st May 2013 , then his total tax liability will be:

Net Tax Payable + Interest at 1% per month for 10months on tax payable + Penalty

Rs. 15000+ ( 1% * 15000*10 months) + 5000
= 15000+ 1500+5000= Rs.21500.

The period of 10 months shown above is calculated from Aug 2012 to May 2013 ,both months inclusive.

As part of the tax planning advice, We always suggest that tax payers not only pay their taxes promptly but also file their tax returns regularly. This will ensure that tax payers do not spend money unneccesarily on interest on taxes and penalties.

 
If you haven’t filed your returns for the Previous year 2011-2012 yet, do file it ASAP. As they say, a penny saved is penny earned!

CWA Srinivas K

Artha Tax Consulting

The author is an Income tax Planner at Artha Tax Consulting - Your Personal Income Tax Planner. He can be reached at: arthataxconsulting@gmail.com