Here’s what could happen if you don’t file your income tax returns on time

By Elton Gomes

Not filing your income tax returns on time can have dire consequences. Even though a taxpayer is eligible for a refund, not filing returns can lead to prosecution. A ruling by the Delhi High Court is an example of what could happen if taxpayers fail to file income tax returns on time.

In a recent decision, the Delhi High Court held the prosecution proceeding stands committed when a taxpayer does not file income tax returns within the prescribed date.

The case involved an individual taxpayer who had failed to file his income tax returns for the Assessment Year (AY) 2003-04 to 2005-06 within the stipulated time under section 139 (1) of the IT Act. He approached the Delhi High Court after a lower court ruled against him.

The Delhi High Court noted that he failed to abide by the notices issued under Section 142 (1) (which requires a taxpayer to furnish tax return and certain other information) for non-filing of returns. The assessing officer initiated prosecution proceedings against the taxpayer as punishable under Section 276CC of the IT Act.

“Considering the government’s increased focus on compliances, it is important for taxpayers to file their tax return within the prescribed due dates. Where the tax authorities detected and initiated prosecution proceedings, the claim of a beneficial provision that the taxpayer cannot be prosecuted when the tax due is not more than Rs 3,000 will not come to the rescue of the taxpayer,” Kuldip Kumar, partner and leader, personal tax, PricewaterhouseCoopers India, told  Business Standard.

What could happen if you don’t file your returns on time

Failure to file income tax returns on time could invite a penalty. A three-tier fee system has been introduced if returns have not been filed by the due date. If returns are filed beyond due date but before December 31, then the penalty will be Rs. 5,000. In all other cases it will be Rs. 10,000. In case of taxpayers whose total income does not exceed Rs. 5,00,000, the penalty payable is restricted to Rs. 1,000, Ashok Shah, partner, N.A. Shah Associates LLP, told NDTV.

In addition, when income tax return is not filed within the due date, interest at the rate of 1% per month or part of the month is levied up to the date of filing the returns. This interest is payable on tax, which is then payable after deducting TDS (tax deducted at source), TCS (tax collected at source), advance tax, and other reliefs/tax credits available under the law, said Chirag Chordia from N.A. Shah Associates LLP.

Why income tax filing is necessary, and what are its benefits

Filing returns indicates that you are a responsible citizen. Besides, it facilitates the entry of individuals and businesses in various transactions since their income has been recorded by the tax department.

Filing returns also helps if taxpayers are planning to apply for a home loan, as the home loan company is most likely to ask for it. Similarly, credit card companies could insist on proof of returns before issuing a card. Financial institutions could also ask for proof of returns before doing any transactions with you.

For individuals planning to apply for vehicle loans, filing income tax returns can prove to be very helpful. Almost all major banks ask for a copy of returns, which is why maintaining a steady record of returns could make life easier.

Furthermore, during visa processing, foreign consultants might ask for proof of your returns. This is done to ensure that the individual applying for visa has a source of income in India and does not intend the leave the country forever. The US, Canada, and major European countries strictly follow this process and thus filing income tax returns is important.


Elton Gomes is a staff writer at Qrius

income tax