What happens if you don’t file your ITR today?

The last date for filing your income tax return (ITR) for the financial year 2020-2021 is today- 31st December 2022. But there are many who are still struggling with their paper work and wondering what happens if they miss the due date even today. Will it lead to a penalty or interest payment?

The due date of filing ITR has been extended twice - from 31st July to 30th September and then to 31st December. Now, if we don’t file our ITR before 31st December, there are certain consequences. First of all there is penalty amount which can be as high as Rs 5000 depending on your income. “There would be penalty of Rs 5000 if income is more than Rs 5 lakh and penalty of Rs 1000 if income less than Rs 5 lakh,” says Sujit Bangar, Founder Taxbuddy.com.

Another major consequence of non filing of ITR before due date is regarding carry forward of losses. For example: you might have made capital loss in the stock market last year. If you don’t file your ITR before 31st December then you won’t be able to adjust it against the capital gain of this year. “For carrying forward losses, one need to file ITR before due date,” says Bangar.

Given that overseas investing has become popular, many times it happens that the tax is withheld by the foreign country for which one can claim credit later in the domestic country.

For example: Dividends are taxed in the US at 25 per cent. The broker subtracts the 25 per cent taxes before crediting remaining 75 per cent to the investor. However, you can take credit for the dividend tax paid when filing taxes in India. 

“If we have any income earned outside India on which tax has been withheld by foreign country, we can claim credit of such taxes paid abroad. Only condition is that ITR shall be filed before due date,” says Bangar.

One of the most important points is if you need to pay taxes then you might have to pay interest also on the amount. 

“If there is any tax payable, don’t wait to pay this till due date. You should pay such tax immediately as there would be interest at 1 per cent per month from 1st August till payment of such tax if tax payable is more than Rs 1 lakh,” says Bangar.