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 1^st April 2019 to 31^st March 2020 was 31^st 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 Taxpayer	Due Date
Individual	31^st December, 2020
Body of Individuals (BOI)	31^st December, 2020
Hindu Undivided Family (HUF)	31^st December, 2020
Association of Persons (AOP)	31^st December, 2020
Businesses (Requiring Audit)	31^st January, 2020
Businesses (Requiring TP Report)	31^st 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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What is the penalty if you file your Income Tax Returns after 31st December 2020?

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 deadline for filing Income Tax Return for corporate and other assessee’s who are to get their accounts audited under Income Tax Act 1961 or under any other law for the time being in force is 30th September and for others, it is 31st July every year as have been prescribed under the Act.

However, with the ongoing COVID -19 pandemic a lot of income tax due dates were extended by the Central Government. Individual taxpayers now have until 31st December, 2020 to file their return of income, earned between April 1, 2019 and March 31, 2020. The due date of furnishing the income tax returns for taxpayers whose accounts require to be audited has been extended to 31^st January, 2021

The due date for furnishing of various audit reports under the Act, including the tax audit report and report in respect of international/specified domestic transaction, is extended to 31^st December, 2020. The due date for the small taxpayers, or income tax assessee’s with tax liability up to Rs 1 lakh, is 31^st January, 2021.

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 2020.
However, if taxpayer’s total income does not exceed Rs 5 lakh, then the maximum penalty levied for delay will not exceed Rs 1000.

What are the other effects of not filing ITR before the due date?

Carry forward of losses not allowed

Set off of losses means adjusting the losses against the profit or income of that particular year. After making the appropriate and permissible set offs, there could still be unadjusted losses.
These unadjusted losses can be carried forward to future years for adjustments against income of these years.
However, unless you file your ITR, you cannot recompense your expenses/losses in the previous financial year to the current.
If tax returns are not filed on time, unadjusted losses (with some exceptions) cannot be carried forward to future years.
Hence, to ensure that the losses are carried forward for future adjustment, a tax return would be required to be filed

Liable to interest on tax liability

If you don’t file your ITR, the belated return could lead to extra interest on monthly basis for the remaining tax payable by you.
Interest under section 234A is levied for delay in filing the return of income
Taxpayer will be liable to pay simple interest at 1% per month or part of a month for delay in filing the return of income from the period commencing on the date immediately following the due date of filing the return of income and ending on the date of furnishing the return of income, or in case where no return has been furnished, on the date of completion of the assessment under section 144.

Interest on refund u/s 244A may be lost

According to Section 244A, where refund of any amount becomes due to the assessee, he shall, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely:

where the refund is out of any tax paid by way of advance tax or treated as paid, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of 1.5% for every month or part of a month comprised in the period from the 1st of April of the assessment year to the date on which the refund is granted
in any other case, such interest shall be calculated at the rate of 1.5% for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted.

The taxpayer will not be entitled to any interest on refund, if the proceedings resulting in the refund are delayed for the reasons attributable to the taxpayer or the deductor (whether wholly or in part). In such a case, where the taxpayer has not filed ITR on time; interest on refund u/s 244A may be lost as delay in filing is attributable to the taxpayer for the period by which they had filed late return.

Best Judgment Assessment under Section 144

Assessee will be liable for best judgement assessment under Section 144 of the Income Tax Act. According to Section 144, the Assessing Officer, after taking into account all relevant material which he has gathered, is under an obligation to make an assessment of the total income or loss to the best of his judgement and determines the tax payable by the assessee in the following cases:-

where any person fails to make return under Section 139(1) and has not made a return or revised return under Section 139(4) or Belated Return under Section 139(5)
where any person:-
- fails to comply, with all of the terms of a notice issued under Section 142(1); or
- fails to comply with directions issued under Section 142(2A) for getting the account audited.
where any person, having made a return, fails to comply with all terms and conditions of a notice issued under Section 143(2)

Liable to receive notice of prosecution under Section 276CC

The offence under Section 276CC, prima facie, stood constituted upon failure on the part of the assessee to furnish the return of income for the assessment year in question within the period prescribed in law.
A person can be proceeded against for willful failure to furnish ITR under section 276CC of the Income Tax Act.
Such proceedings can result in punishment by way of imprisonment and fine.
The type of imprisonment and the term of imprisonment is linked to the tax that would have been evaded by such person if the failure had not been deducted.

It is always considered a prudent action to file one’s income tax return on time. More than any other benefit, being on the right side of law helps. It is recommended to keep the income tax department informed about one’s income and taxability. This communication is only possible when one files their ITR.

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