Why Filing ITR For FY 2024-'25 Is Crucial: Penalties, Interest And More
Failing to file your income tax return (ITR) on time can lead to penalties, interest charges and loss of tax benefits.
Filing your Income Tax Return (ITR) isn’t just a formality, but a legal obligation if your income surpasses the basic exemption limit. Missing the due date can lead to more serious consequences than just a notice from the Income Tax Department or a penalty.
The ITR filing season is underway for financial year 2024-25 (Assessment Year 2025-26). The Central Board of Direct Taxes (CBDT) has extended the deadline to file the ITR for taxpayers who don’t need their accounts to be audited to Sept. 15, from July 31 earlier.
Here’s a look at what could happen if you don’t file your ITR on time.
Late Filing Penalty
If you fail to file your ITR by the due date of Sept. 15, you could face a penalty under Section 234F of the Income Tax Act, 1961. A delay could attract a late fee of Rs 5,000. However, if your total income is below Rs 5 lakh, the penalty is limited to Rs 1,000. It’s advisable to file your ITR within the due date and avoid the penalties.
Interest On Tax Due
If you owe taxes and fail to file the return, interest will be levied on the unpaid tax amount under Section 234A of the I-T Act. A simple interest of 1% per month (or part of a month) will be charged on the unpaid tax, calculated from the return filing due date until the actual filing date.
Prosecution Risk
If you deliberately fail to file your ITR despite receiving notices from the Income Tax Department, the assessing officer can initiate prosecution proceedings. This may lead to imprisonment ranging from three months to two years, along with a fine. If the unpaid tax amount is substantial, the jail term can extend up to seven years.
Losses Can't Be Carried Forward
Failing to file your return on time means you lose the ability to carry forward most losses, such as those from business or capital gains, to future years. The only exception is losses from house property, which can still be carried forward even if the return is filed late.
Trouble In Getting Loans Or Visas
ITR filings are often used by banks and financial institutions to assess your financial health. Similarly, foreign consulates sometimes ask for ITR proofs during visa processing. Not filing can become a roadblock if you're planning to take a loan or travel abroad.
Belated Return
If you miss the initial deadline, you can still file a belated return. But this must be done before Dec. 31 of the assessment year. Note that belated returns attract penalties and don’t allow you to revise the return later.
Filing your ITR on time is crucial, not just to avoid penalties, but also to stay financially compliant. Even if your income is below the taxable limit, filing returns can help build a good financial record.
