In India, each taxpayer needs to file their income-tax return (ITR) for every financial year. Section 139 of the Income Tax Act 1961 has laid down procedures and processes for filing the returns. Wherein, an individual needs to verify their ITR through e-filing generated confirmation called ITR-V within 120 days from the date of filing.
If the ITR is not verified through any mode as mentioned below within the given time, then it will be treated as an Invalid ITR and it will be construed as if the return is not filed at all. Hence, taxpayers need to file it again and all consequences of non-filing of ITR are applicable to taxpayers.
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A taxpayer can verify his/her ITR through:
a) Aadhaar OTP or
b) Net-banking or
c) EVC (Electronic Verification Code) through Bank Account Number or
d) EVC through Demat account or
e) Bank ATM or
f) By sending a physically signed copy of ITR-V through the post to centralised processing centre (CPC), Bengaluru
It has been observed by the Central Board of Direct Taxes (CBDT) through CPC that a huge number of electronically filed ITRs are pending for processing as they were not duly verified by the taxpayers in respective assessment years. The government is pushing to move the whole taxation and compliance process online with real-time updates and to reach there all old incomplete compliances have to be completed.
CBDT Circular
CBDT (Central Board of Direct Taxes) vide Circular No. 13/2020 dated July 13, 2020, has provided one-time relaxation to taxpayers for verification of ITRs for the Assessment Year (AY) 2015-16 to 2019-20 i.e. for these 5 years which were submitted electronically within the time allowed under section 139 and pending due to the non-filing of ITR-V or non-verification through online mode.
However, for taxpayers where the income tax has already initiated some action or issued any notice/communication for ratification of this non-compliance are not eligible to avail of the benefits under this circular.
The CBDT circular extending the timeline for verification of all previous years' ITRs is a well-structured move by the government as it is doing its every bit to ease the cash flow for citizens, who can get some relief in the same either by way of refunds or non-payment of interest in case of delayed returns.
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Broadly, there are two main intentions of this circular- 1) The government intends to clear-off all pending mess during the COVID-19 pandemic as in course of the coronavirus outbreak most people are having a good amount of time at their disposal to look-at the non-compliance issues 2) for a taxpayer this is also an opportunity regularise all non-compliances related to ITRs during this extended period.
The Income Tax Department gives interest on refunds of income tax if there is a delay in their processing. To provide benefits here, the CBDT clarified that in this situation, in case there is a delay in issuing a refund then the interest will also be paid on the refund amount. For calculation of interest on a delayed refund, the period for which the return was unverified should be included or excluded shall be decided by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner whose decision thereon shall be final.
One should look at the applicability of late filing interest provisions for cases where taxes were supposed to be paid - it is being clarified that the applicability of late interest filing will remain the same as has been shown in the return. Hence, the CBDT has provided this relaxation in this compliance.
If any ITR for the past 5 years (AY 2015-16 to 2019-20 ) remains unverified after September 30, 2020, such a return shall be treated as an invalid one. The assessing officer (AO) shall direct the tax assessee to file the original ITR once again. In this situation, delayed interest filing may apply just like the original ITR as it will be assumed as not filled (any) before. Further provisions of late filing fees will be applicable in this case.
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To give an example, an assessee had filed an ITR for FY 2016-17 before July 31, 2017, with a refund amount in that income tax. The assessee was not able to verify the return before November 2017.
The consequences of this non-verification are - the return was not verified; hence it was not eligible for processing. Since the return was not processed, the intimation for processing could not be issued and the refund was not ascertained by the department.
The assessee was not able to receive back his due refunds and was also looking at the interest on the same. Now with CBDT's circular, the assessee can verify the return again and get back his due refund and that too with interest.
This is the last window given by the government to clear all pending unverified returns for the last 5 years. There must be some taxpayers who have refunds but have not revived them (refunds) because they had not verified the ITR within the stipulated time of 120 days, here by adhering to the circular they will get their due refunds as well the interest.
On the other hand, a taxpayer who has filed his/her ITR with payment of interest and has not verified his/her return within the stipulated period will get a respite of compounding effect. Otherwise, he/she would have to pay interest for the complete delayed period and would be forced to file an original ITR.
(The author is Founder & Chairman, HostBooks Ltd)