What is the Penalty for Not Filing the Income Tax Return?

  • Author :
  • TATA AIG Team
  • Published on :
  • 03/01/2024

Every taxpayer is required to file an Income Tax Return (ITR) with the tax department. This is done once a year to declare the income earned the previous year.

Depending on whether you have already paid your taxes, income tax returns are either filed on a monthly or quarterly basis.

One of every taxpayer's most important responsibilities is filing income tax returns (ITR). By helping the government this way, it not only makes sure that the law is followed but also contributes significantly to the development of the country. But sometimes, life gets busy, and we forget about deadlines.

Usually, income tax returns must be filed by July 31st of the assessment year. Missing this deadline may result in a number of issues. To encourage timely filing and penalise those who miss the deadlines, the Income Tax Department has put strict measures in place.

We will discuss the fines and repercussions of a person who fails in filing late income tax return tax in this blog post.

Section Wise Penalties for Not Filing ITR

Understanding the specific penalty for late filing of itr or non-filing of income tax returns is essential. Let us break down the penalties according to different sections of Income Tax Act:

Section Nature of Offence  Penalty Levied
Section 234A A person has an unpaid tax balance and does not file their ITR by the deadline. Since the scheduled due date, interest on the outstanding tax amount has accrued at a rate of 1% per month or portion of the month.
Section 234F ITR filing after the deadline ₹5000 if ITR is submitted before the 31st December of the Assessment Year;  ₹10,000 if submitted after the 31st December but before the 31st March of the Assessment Year.  This is for those with an annual income of more than ₹5 lakh.  The penalty for those earning less than this amount is ₹1,000.
Section 270A A taxable income earner either neglects to file their ITR or inadvertently underreports their income on their returns 50% of the total amount of taxes due on the income for which no return was filed
Section 271H Fails to submit TDS and TCS returns by the deadline ₹10,000–1,000,000 in addition to the late filing penalty of ₹200 per day until the TDS/TCS is paid under Section 234E.

What is the Taxpayer-Wise Penalty for Income Tax Returns that are Filed Late or Not Filed at All?

Depending on the taxpayer's income and the length of the delay, there is a late fee for income tax return AY 2023 24 for filing income tax returns.

Let us group the fines according to the types of taxpayers:

Salaried Individuals: Three types of people are taken into consideration here.

Annual total income less than ₹ 2.5 lakhs: No fine (no ITR penalty for a return of zero)

Annual total income less than ₹ 5 lakhs: The maximum fine is limited to ₹1,000.

Above ₹ 5 lakhs in total annual income: Up to ₹ 10,000

Firms: Up to - ₹10,000

Self-employed People: ₹10,000

Senior Citizens: Only senior citizens who fit the following requirements are subject to the aforementioned penalty for failing to file an ITR under Section 234F:

Between 60 and 80 years old and earning over ₹3 lakhs annually in total.

Citizens older than 80 years old and earning more than ₹5 lakhs annually overall.

Are Late ITR penalties also Applicable to Individuals Whose Income is Less than the Taxable Limit?

In general, people as well as organisations with total gross income below the exemption limit are not subject to ITR late fee from the Income Tax department for failing to file an ITR.

The Income Tax Act was amended by the Union Budget 2019. As a result, ITR filing is required for taxpayers who meet the following criteria despite not having taxable income:

Those who have spent more than ₹1 lakh on electricity consumption.

Those who have deposits in one or more current accounts with a bank totaling more than ₹1 crore.

Those who live in India but make their living from assets outside of the country.

Those who spend more than ₹2 lakhs travelling abroad in the year.

If you meet any of these or additional requirements outlined in the most recent amendment to the Income Tax Act, you must pay the prescribed penalty for failure to file an ITR.

What are the Consequences of not Filing ITR?

Aside from the monetary penalty for not filing itr, not filing income tax returns has several other consequences. These could include:

Ineligibility for Loans

Non-filing of ITR can impact your creditworthiness. Financial institutions and other sectors often require ITR documents when processing loan applications.

Difficulty in Visa Processing

For individuals planning to travel abroad, many countries require income tax returns as a part of the visa application process. Non-compliance can lead to complications in obtaining visas.

Loss of Refunds

Filing income tax returns is the only fair way to claim tax refunds, if applicable. Failure to file means losing out on any potential refunds.

Legal Consequences

Persistent non-compliance may lead to legal actions, including prosecution and imprisonment in extreme cases.

Business Impact

In the case of companies and businesses, non-filing of income tax returns may result in the withdrawal of certain benefits and incentives.

Understanding these implications emphasises the significance of filing income tax returns on time and in accordance with the law.

How to Pay ITR Penalty

Paying ITR late filing penalty is a simple process that can be completed online through the official income tax portal. Here is a step-by-step guide to paying ITR penalties:

  • Visit the official income tax portal.

  • Log in using your user ID (PAN), Password, date of birth, and the captcha code.

  • Once logged in, go to the “My Account” section and click on “View Demand.”

  • Choose the assessment year for which you need to pay the penalty.

  • Any exceptional demand against your PAN will be displayed on the portal. Validate the demand and double-check the penalty details.

  • After validating the demand, click on the “Pay Now” option.

  • The portal will redirect you to the income tax payment gateway. Choose the desired payment method (net banking, debit card, credit card, etc)

  • Enter the payment details required and complete the payment process.

  • After the payment process is completed, you will receive an acknowledgement or transaction ID. Note down the ID for future reference.

  • Important points to Note

  • Ensure that while paying a late ITR penalty, several things like payment details, including the penalty amount and assessment year, are accurate before making the payment.

  • For your records, keep a copy of the payment receipt and transaction ID.

  • If you have any problems during the payment process, you should contact the Income Tax Department helpline or a tax professional.

To Conclude

Understanding and complying with your income tax obligations is not only a legal requirement but also a critical contributor to the nation's economic development. Filing your income tax returns on time not only helps you avoid financial penalties and legal ramifications but it also ensures a smooth financial journey.

To reduce your tax liability and protect your health simultaneously, consider investing in health insurance plans. With a Tata AIG health insurance policy, you can not only protect yourself from the inflating medical costs but also avail of tax deductions on policy premiums under Section 80D of the ITA.

Since the health insurance premium is tax deductible up to a certain limit, you can prioritise your fiscal responsibility and personal healthcare in your financial journey to ensure a balanced and secure future by investing in a medical insurance policy .

FAQS

Is it ok if I do not file an income tax return?

No, it is not recommended that you skip filing your income tax return. Filing your tax return is a legal requirement, and failing to do so can result in penalties and other consequences. It is necessary for financial compliance and adds to your financial well-being.

Can I file ITR for the previous 3 years?

Yes, you are permitted to file income tax returns for the previous three years. The Income Tax Act allows taxpayers to file belated returns up to three years prior to the assessment year. However, late filing may result in penalties, so it is best to file as soon as possible.

How can I file ITR without penalty?

To avoid penalties, file income tax returns by the due date, which is usually July 31st. To avoid additional penalties, file a late return before the end of the assessment year if you miss the deadline. Keep up to date on your tax obligations and use online tools to make the filing process go more smoothly.

Can I file my ITR after the due date?

Yes, after the due date, you can file a belated income tax return. Penalties, on the other hand, may apply and can accumulate over time. It's best to file the late return as soon as possible to avoid financial penalties and stay in compliance with tax regulations.

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