Struggling taxpayers risk penalties as ITR deadline approaches

As the July 31 deadline for filing Income Tax Returns (ITR) approaches, taxpayers are grappling with persistent glitches on the tax filing portal. Despite these issues, the Income Tax Department reports that over five crore ITRs have been filed as of July 26. However, many taxpayers remain at risk of missing the deadline, potentially incurring penalties.

Missing the July 31 deadline can result in significant financial consequences. According to Section 234F of the Income Tax Act, 1961, late ITR filings attract a penalty of Rs 5,000. For those with a taxable income of Rs 5 lakh or less, the penalty is capped at Rs 1,000. This penalty is applicable even if the belated ITR indicates zero tax payable. Taxpayers filing after the deadline must include the late filing fee challan information in their submission.

Certain taxpayers are mandated to file an ITR even if their income is below the basic exemption limit, provided they meet specific conditions. These include spending Rs 2 lakh or more on foreign travel, paying Rs 1 lakh or more on electricity bills, depositing Rs 1 crore or more in current accounts, or meeting other prescribed criteria.

Penalties apply to those whose taxable income exceeds the basic exemption limit or who meet mandatory filing conditions under Section 139(1) of the Income Tax Act. Filing a belated ITR requires selecting Section 139(4) instead of Section 139(1) and includes paying penal interest on any outstanding tax.

Consequences of late filing extend beyond penalties. Taxpayers may lose benefits such as carrying forward losses from capital gains and business income, and cannot opt for the new tax regime for the Assessment Year 2024-25 if they file a belated ITR. However, if the taxable income is below the basic exemption limit, taxpayers can file late without penalty, though they must file to receive any potential tax refund.