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December 28, 2020

How to Save Penalty of Rs 10k if you are filing ITR post 31 December

by CA Shivam Jaiswal in Income Tax

How to Save Penalty of Rs 10k if you are filing ITR post 31 December

How you can file NIL ITR and revise later to save 10k penalty

An income tax return (ITR) is basically a document that is filed as per the provisions of the Income Tax Act, reporting one’s income, profits and losses and other deductions as well as details about tax refund or tax liability. The original due date for submitting ITR for assessment year 2020-2021 relevant to financial year 1st April 2019 to 31st March 2020 was 31st July 2020. However, the same was extended due to pandemic COVID-19.

Extension of Due Dates due to COVID 19

The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. The lockdown though necessary has led to a disastrous impact on the economy. With an ever-increasing corona virus cases, lockdown was considered as an only solution to flatten the curve. However, the measures which were implemented to avoid a human disaster, have in turn led to the birth of several issues such as unemployment, recession, hindrance to economic growth, financial instability and so on.

The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states, to sector related incentives and tax deadline extensions. With the ongoing COVID -19 pandemic a lot of income tax due dates were extended. One of these extension benefits were also provided to the due date of filing income tax returns.

The deadline to file ITR by individual taxpayers for FY 2019-20 ends on December 31, 2020, while the same for taxpayers whose accounts require to be audited is January 31, 2021.

Therefore, ITR due dates for FY 2019-20 are as follows:

Category of TaxpayerDue Date
Individual31st December, 2020
Body of Individuals (BOI)31st December, 2020
Hindu Undivided Family (HUF)31st December, 2020
Association of Persons (AOP)31st December, 2020
Businesses (Requiring Audit)31st January, 2020
Businesses (Requiring TP Report)31st January, 2020

At the time of filing our income tax return (ITR), one takes the utmost care not to make mistakes. However, at times it may happen that taxpayers make a mistake while filing our ITR at the last minute. These could include mentioning the wrong bank account number, forgetting to declare interest income, or claiming the wrong deduction etc. However, the question arises is whether can a person file his ITR again which has been originally filed by that person with some mistakes or omission.

Is filing a revised return allowed under Income Tax Act?

  • A person may furnish a revised return of income under section 139(5).
  • If any person, having furnished a return under section 139(1) or section 139(4), discovers any omission or any wrong statement therein, he may furnish a revised return.

What is the Time Limit for filing revised return?

  • Revised return can be filed at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
  • The word assessment will refer to assessment made under section 143(3) and section 144.
  • Assessment made under section 143(1) will not be treated as assessment for this purpose as such return can be revised even after the intimation under section 143(1) has been served.
  • Also, the return can be revised before the date of passing the order under section 143(3) or section 144 and not till the date of service of such order.

A revised return will substitute an original return

  • Once a revised return is filed, the originally filed return must be taken to have been withdrawn and substituted by the revised return.
  • Thus, where a return was filed under section 139(1) declaring income and later it is revised declaring a loss, the loss shall be allowed to be carried forward as the revised return shall substitute the original return which was filed with in time.
  • Similarly, where a return is filed declaring a loss within the time allowed under section 139(1) and such loss is increased in the revised return, such higher loss will be eligible for being carried forward.
  • Interest under section 234B and 234C will be recalculated under every revised return.
  • If the taxpayer has revised return after the survey/search and it was has found that the mistake in the original return was not bona fide then levy of penalty is justified.

How many times can a taxpayer revise the return?

Theoretically a return can be revised any number of times before the expiry of one year from the end of the assessment year or before assessment by the department is completed; whichever event takes place earlier.

Is there any penalty if one files their income tax returns after the due date?

If a taxpayer fails to the file the income tax return within the prescribed time limit, he would be liable to pay late fees for such default as per provisions of section 234F of the Income Tax Act.

Section 234F gets attracted if the following conditions are satisfied:

  • The assessee is mandatorily required to file the income tax return as per the provision of section 139; and
  • The assessee has either not filed or has delayed in the filing of the said income tax return.

What are the Late Fees and Penalty under Section 243F?

  • The income tax department notified the taxpayers for late filing of tax returns for A.Y. 2020-21, along with a penalty of Rs. 5000 (on filing the return after the due date but on or before 31st December) and Rs. 10,000 (on the filing of return after 31st December to 31st March).
  • The taxpayer has to file the late filing of tax returns for A.Y. 2020-21 before 31st March anyhow.
  • Penalty is applicable even if the taxpayer files the returns before 31st March while there is no option to file the returns after 31st March 2021.
  • However, if taxpayer’s total income does not exceed Rs. 5 lakh, then the maximum penalty levied for delay will not exceed Rs. 1000.

File Nil Return before due date to avoid penalty

A nil return is an income tax return filed specifically to declare to the Income Tax department that no amount has been paid as taxes in the respective financial year. This happens only when the income is below the exemption limit or when a rebate reduces the tax liability to zero. Filing a nil return is no different from filing a regular income tax return.

Filing a nil return is no different from filing a regular income tax return.

  • Enter your income details and deductions. Income tax is computed and you will be shown that you have no tax due.
  • Submit your return to the Income Tax Department. And send your ITR-V to CPC Bangalore to complete the e-filing process.

So, if you have still not filed your ITR and won’t be able to file it before the due date of 31st of December, you can always file a Nil Return and then revise it before 31st March, 2021.

In doing so, one can avoid late fees of Rs. 10,000 and the chances of having ‘best judgement assessment’ conducted on their income.

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