Replied 26 January 2020
As per the erstwhile provisions of the income tax law, filing a tax-payable return was considered as a defective return.
Thus, taxes were required to be paid before filing the return.
With effect from tax year 2016-17, provisions were amended and thus filing of a tax payable return is not considered as a defective return.
However, as per other provisions of the income tax law, if taxes are not paid before filing the return, the assessee will be treated as ‘assessee in default’ and thus may be subject to penal consequences along with interest implications.
Accordingly, if there is any tax payable at return filing stage, the same needs to be paid before filing the tax return;
# Further, if taxes are not paid by the original return filing due date (which is 31 July), a belated return will have to be filed once the taxes are paid. However, filing a belated return can lead to additional consequences like:
a) Additional interest for delay in return filing;
b) Fees of Rs 5,000 will be payable if return is filed on or before 31 December of the relevant Assessment Year (AY) or else the fees will be Rs 10,000. However, if the total income does not exceed Rs 5 lakh, fees payable will be Rs 1,000;
c) Losses (other than House property loss) cannot be carried forward;
d) Certain specified exemptions / deductions will not be available
It is important to note that the due date of filing a belated return is amended with effect from AY 2017-18. Thus a belated return can now be filed by the end of the relevant assessment year or completion of assessment, whichever is earlier (viz – for tax year 2016-17 (i.e. AY 2017-18), the belated return can be filed only up to 31 March, 2018).
Given the gravity of the above complications, it is imperative to prepare tax computation well in advance to project appropriate tax liability. Thus, necessary tax arrangements can be made for payment of taxes before filing the return. Further, payment of timely advance tax during the tax year as per specified installments can save interest costs, which will otherwise be payable at the rate of 1% every month or part of the month. Hence, it is important to keep the tax compliance and related timelines in order, else there could be additional tax, penal and interest consequences.