Why you should file your returns early?

Why you should file your returns early?

Even though many taxpayers file their tax returns on or about 31st July every year, there is no need to put it off until the last minute. By filing your income tax return at last minute, you might forget to claim all your eligible deductions and end up paying more tax than you actually need to! Even if you don’t file your returns early, you can begin preparing as early as possible. it gives you time to collect all the documents such as your LIC receipts, Bank statements, Interest certificates and so on. You consultant will also have a flexible schedule and can start working on your accounts immediately. Filing you Income Tax Returns (ITR) on time has many benefits.  You can save a lot of money by filing your ITR on time, irrespective of whether you have tax payable or losses to be carried forward. Individuals primarily with salary income and certain other tax payers are required to file their tax returns by 31st July, 2020 for the Previous Year 2019-20 (Assessment Year 2020-21).

Five Things to remember while filing returns  this year

1. Standard deduction for salaried persons raised from Rs. 40,000 to Rs. 50,000
2. Individuals having taxable income upto Rs. 5,00,000 will get full tax rebate. However, returns must be filed if taxable income more than Rs. 2,50,000 in order to claim the rebate.
3. From AY 2020-21 onwards, upto two house properties can be treated as self occupied.
4. Deduction from Long Term Capital Gains u/s 54 has been extended for investment made by way of purchase or construction of two residential houses provided the amount of capital gains does not exceed Rs 2 crore.
5. Every bank/post office is required to deduct TDS u/s 194N on cash withdrawal made on or after September 1, 2019, if the aggregate the cash withdrawal by a person during the previous year, from one or more of his bank/post office account, exceeds Rs. 1 Crore.

Belated tax return

According to the provisions of Income Tax Act, 1961, an assessee who has not filed his tax returns within the due date or as per time specified under a notice issued to him by tax authorities, may do so before end of relevant Assessment Year or before the completion of assessment, whichever is earlier. Thus, in case you miss the due date of filing ITR by  31st July, 2020 for the PY 2019-20, you can still file the tax return by 31st March, 2021. Please note that after 31st march 2021, you will not be file the ITR for AY 2020-21.

[Note: Due to COVID-19 outbreak, the Union Finance Minister  has announced some relaxations for compliance requirement and hence, the last date for filing the belated or revised return for the PY 2018-19 (AY 2019-20) is extended from 31st March, 2020 to 30th June, 2020.]

Interest for default in furnishing return

If a person fails to furnish the return or furnish the return belatedly, he shall be liable to simple interest of 12% P.A. for the period of delay on the tax on total income determined in the return processed or as per regular assessment if no return is filed.

Late fee for belated return filing

If a person fails to furnish the return before due date, he shall be liable to a mandatory late fee as below:

Revised returns

Furthermore, there may also be instances where returns have been filed by the due date and subsequently, the assessee finds some error in the same. In such an event, he may file revised returns any time before end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

Defective returns

Sometimes, certain errors are observed by the Centralized processing Center (CPC) of Income Tax Department in the return filed by the assessee and such returns of income are defective. CPC shall intimate the errors to the assessee in the online portal and give him a chance to rectify it within 15 days from the date of such intimation or within such further period as may be specified. If the assessee fails to correct the error, then the returns filed by him shall be treated as invalid and the provisions of the Act shall apply as he has failed to file his tax returns.

Bottom line

Apart from the incremental cost due to interest and late fee, you may also face the following consequences:-

• You will not be able to carry forward your Business loss (Speculation or otherwise), short term or long term capital loss, etc to the subsequent AY.
• Late filing of return will delay processing of your refund and also you may lose the interest on refund u/s 244A especially in case if you have major amount as refund.
• You may not be able to revise your return.

We also recommend you to pay your Advance tax on time and meet statutory compliance such as TDS, TCS on time to save unnecessary interest, fee, penalty etc.