Whenever I think of the word ‘Income Tax’, a television commercial comes flaashing into my mind, where the waiter used to take his share from every dish before serving it. Tax paid on our income is like that slice of a pizza which has to be mandatorily shared with the waiter. Its better to share that slice as soon as possible and enjoy the remaining pizza. One such deadline for sharing a slice of your income was 31st July, 2010. This was the last date for filing income tax returns for the financial year 2009-10, for all those persons whose accounts are not subject to any kind of audit. If you have missed the deadline, don’t worry, you still have the luxury of extra time. But every luxury comes at an extra cost and with an expiry date. The expiry date is 31st March 2011 and the extra cost may be interest, penalty or certain disallowances. Let us dig deeper to explore the cost of this luxury.
Payment of interest : If your entire income of a financial year was subject to tax deducted at source (TDS), then the liability to pay tax may not arise. Also, if tax has been deducted at a higher rate or before providing for deductions like interest on housing loan, Chapter VI-A deductions (e.g. deductions under section 80C, 80D etc.), then you may be eligible for tax refund. But, if tax has neither been deducted at source nor paid by you, then missing the 31st July deadline will attract two types of interest.
1.Interest for not furnishing the tax return : If the return is filed after the due date i.e. 31st July, then under section 234A of the Income Tax Act, simple interest shall be payable at the rate of 1% for every month from the date immediately following the due date i.e. 1st August, to the date of furnishing of return or if no return is furnished, then upto the date of completion of assessment. This interest shall be calculated on the amount of tax on total income, after adjusting TDS. For example, if your tax liability for the FY 2009-10 was Rs. 20,000 and you file your return on 31st December 2010, then interest shall be calculated from 1st August to 31st December @ 1% per month on Rs. 20,000, which comes out be Rs.1,000.
2. Interest for not paying the advance tax : Further, where the tax payable during the year is Rs. 10,000 or more, then the liability to pay advance tax on 15th September, 15th December and 15th March also arises. If you have failed to pay the advance tax or the amount of advance tax paid by you is less than 90% of the assessed tax, then according to section 234B, you will have to pay simple interest at the rate of 1% for every month, beginning from 1st April to the date of completion of regular assessment. This interest is calculated on the entire amount of advance tax or on the amount by which the advance tax paid falls short of assessed tax. For example, if the amount of assessed tax is Rs. 20,000 and the amount of advance tax paid is Rs. 5,000, then interest @ 1% shall be calculated on Rs. 15,000. Further, under section 234C, simple interest at the rate of 1% shall be payable if the amount of advance tax paid in any of the three instalments falls short of the prescribed percentages
However, even if you have not filed the return by 31st July, no interest shall be payable if your net income is below the basic exemption limit of 2,40,000 , 1,90,000 and 1,60,000 in case of a senior citizen, female assessee and male assessee respectively.
Penalty : If the luxury provided by the Income Tax Department also expires, i.e. if you fail to furnish the return of income for the FY 2009-10 by 31st March 2011, then a penalty of Rs. 5,000, in addition to the above mentioned interests, may also be levied. Such a return filed after the end of the relevant assessment year but before the expiry of one year from the end of the relevant assessment year is called a belated return. For Example, the return of income for the FY 2009-10 should have been filed by 31st July 2010, and if not, then after paying the above mentioned interests, by 31st March 2011. Even if the return is not filed by 31st March 2011, then it can still be filed before 31st March 2012, but along with the interest and the penalty. Such a return filed after 31st March 2011 but 31st March 2012 shall be called a belated return. A belated return can never be revised.
Disallowance of losses: If your total income consists of any business income, not subject to audit under any law, and during the relevant financial year your business has suffered a loss, then the provisions of Income Tax Act allow you to carry forward such business loss and adjust it in future years with your profits. But, business loss can be carried forward only if the return of income, is filed by the due date i.e. 31st July. If there is a default in filing the return by the due date, then such business loss shall not be allowed to be carried forward. However unabsorbed depreciation and loss under the head house property can be carried forward even if the return is filed after the due date. Loss under the head house property can arise on account of interest payable on loans borrowed for the purpose of acquisition, construction or renovation of the house. In case of a self occupied house property, amount of loss from house property cannot exceed Rs. 1,50,000 which is in the form of interest paid on housing loan.
There is an old saying ‘a stitch in time saves nine’, here, a return in time, could have saved some outgo of interest. Even if you have missed the 31st July deadline, you still have time, remember the next deadline to furnish your returns of income is 31st March 2011.Don’t miss it.
Note : The above article has been written assuming that the assessee is an individual whose books of accounts are not subject to audit under any law.
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