Income Tax Penalty - Here’s How To Avoid An Income Tax Penalty
Douglas Adams once famously said, “I love deadlines. I love the whooshing noise they make as they go by.” If you are like the famed science-fiction writer and have missed the deadline for filing IT returns, don’t despair. You have yet another window of opportunity to file your tax returns, albeit with a price.
According to government rules, you can file your IT returns before December 31 in case you have missed the original deadline of July 31, which was extended to August 31 this year. But, this comes with a penalty of INR 5,000. And just in case if you also miss the December 31 deadline, you will have to pay INR 10,000. However, if your total income is lesser than INR 5 lakh, you pay a standard penalty of INR 1,000.
Here are some reasons you may not want to miss the deadline:
- Interest payable on tax due
A minimum penalty is only one of the negative consequences of filing your IT returns late. You are also required to pay interest on the tax due at the rate of 1% per month. This is applicable until you file your tax returns. So, the sooner you submit your ITR, the lesser you will have to pay as interest.
- No interest on the refund
Generally, when you file your IT returns on time, you are eligible for an Income Tax refund and an interest payment on the refund. However, you forfeit this benefit in case you miss the August 31 deadline.
- No changes allowed
When you file your IT returns, it is possible to make a reporting error. In such a case, you can revise the mistake so that the filed returns are accurate. However, this option is only available to those who submit their returns within the due date. In case you are filing a belated ITR, ensure there are no errors. You may not want to miss on benefits due to a basic filing error.
Important dates to keep in mind
Before we get into the crucial dates, let’s take a look at two critical terms regarding tax returns.
- Financial Year
The Financial Year (FY) in India starts on April 1 and ends on March 31. So, the financial year 2017-18 began on April 1, 2017, and ended on March 31, 2018.
- Assessment Year
The Assessment Year (AY) follows the FY. During this year, you pay your taxes and file IT returns for the previous year. So, in the AY 2018-19, you will file your IT returns for the income earned during FY 2017-18.
It is vital that every taxpayer in India know of these significant dates:
- March 31 (FY)
In case you plan to make tax-saving investments in avenues like Insurance, Public Provident Fund (PPF), Equity Linked Saving Schemes (ELSS), you may want to do so by March 31 of the relevant financial year.
Looking to invest in PPF, click here to get started!
- August 31 (AY)
This was the last date to file your income tax returns for the Financial Year ended on March 31, 2018. The original deadline was July 31, 2018, but the government had extended the deadline by a month. This facility may not be available next year. Therefore, in general, the deadline to file your ITR is July 31.
- December 31 (AY)
In case you have missed the August 31 deadline, you can still submit your ITR by December 31. However, you would have to pay a penalty of INR 5,000.
- March 31 (AY)
If you have missed the December 31 deadline too, you have another opportunity to file your IT returns by March 31 of the next year. However, remember that you would be liable to pay a penalty of INR 10,000 for late filing of ITR. Individuals who earn less than INR 5 lakh a year pay a reduced penalty of INR 1,000.
Read more about dates for filing your taxes here.
If you have missed filing your taxes, you still have time to submit them by December 31. The process is quite simple, and you can do it online from your own home with HDFC Bank. So, file your taxes, and sit back and relax.
Under Section 80C of the Income Tax Act, 1961 you can save tax by investing in Tax saving FD. Calculate using FD calculator.
* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities.