'If you fail to file Income Tax Returns before July 31...': CA lists what could go wrong for taxpayers

As the July 31 deadline to file income tax returns (ITR) for financial year 2023-24 nears, taxpayers find themselves in a bind. 
Despite the chatter and hopes for an extension, it is highly unlikely that the deadline will be pushed forward --similar to what happened last year when many were left scrambling when the extension never happened.

Should you hope for an extension? Chartered Accountant Chirag Chauhan in a tweet says taxpayers failing to file their returns by July 31 would be automatically shifted to the new tax regime, forfeiting the benefits tied to the old regime. 

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This shift can prove costly, as the new tax regime lacks the exemptions and deductions available under the old system, potentially leading to higher taxes and additional interest charges.

Missing the deadline incurs a late filing fee of ₹5,000 under Section 234F of the Income Tax Act, reduced to ₹1,000 for those with an income below ₹5 lakh, he writes. Beyond the penalty, there’s a monthly interest charge of 1% on the outstanding tax amount, adding to the financial burden.

Additionally, failing to file on time means taxpayers cannot carry forward losses incurred from investments in stocks, mutual funds, properties, or businesses. This provision, which allows for the offsetting of these losses against future income, is forfeited if the return is filed late.

Pratibha Goyal, another chartered accountant, said salaried taxpayers with no business income, who prefer the old tax regime, must take the deadline seriously. Otherwise, they will be stuck with the default new tax regime, unable to revert.