An Income Tax Return (ITR) is a form used to submit information about your income and tax to the Income Tax Department. ITR is basically a sort of self-declaration of income, wealth, and taxes paid by taxpayers. most are submitted electronically mode, but there is an option for senior citizens to file it manually as well. The tax obligation of a taxpayer is calculated based on their income. If the tax return indicates that there was an overpayment in one year, then the individual is entitled to receive an income tax refund from the Income Tax Department.

As per the income tax laws requires, the return must be filed every year by an individual or business that earns any income during the fiscal year. The income could be in the form of a salary, business profits, income from house property, or earned through dividends, capital gains, interests, or other sources of income.

Tax returns must be filed before a specified date by every person real or artificial, incorporated or otherwise subject to certain exemption limits is liable to file an ITR. according to law, a taxpayer may be an individual, artificial judicial person, the body of individuals (BOI), Hindu undivided family (HUFs), an association of persons (AOP), firm, trusts, company, society before or legal entities prior to a specified date.

What Happens If I Don’t File My ITR?

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What are the dates for filing income tax?

Category of TaxpayerDue Date FY 2020-21 for Tax Filing
Individual/Hindu Undivided Family/AOP/BOI (no auditing required)31st July 2021
Businesses that require auditing31st October 2021
Businesses that require TP Report30th November 2021

Is it Compulsory to File Income Tax Returns?

According to the tax laws established in India, if your income exceeds the basic deduction limit, you are required to file an income tax return. The taxpayer’s income tax rate is predetermined. Delaying the filing of your tax return not only delays your filing fee but also affects your chances of getting a loan or visa for travel purposes. 

 According to the Income Tax Act, the following entities must mandatorily file ITRs in India:

  • Those who have a total income of over ₹2.5 lakhs.
  •  Senior citizens whose gross total income exceeds ₹three lakhs.
  •  Super senior citizens whose gross overall profits exceed ₹5 lakhs.
  • Companies or firms are required to submit an ITR regardless of returns.
  •  Individuals who want to have their income tax refunded or who want to carry forward their losses as income.
  • Residents who have a property or financial interest in a company outside India.
  • Residents and designated authorities in a foreign account.
  • Individuals who earn income from assets or assets managed by political parties, study groups, telecommunications companies, educational institutions, infrastructure debt funds, hospitals or government agencies, or trusts
  • International companies doing business in India.
  • Non-resident Indians earn more than ₹2.5 lakh in India.

What Happens If Individuals Fail to File Their ITRs?

Penalty

A penalty is a three-tier fee system that has been added for not filing income tax returns on the due date. If a return is filed beyond the due date, then fees payable will be ₹5,000, otherwise, it is going to be ₹10,000. However, for taxpayers whose annual earnings fall under ₹5,00,000, the fees payable could be restricted to ₹1,000.

Reduced Time For Updating Your Income Tax Returns

If you are making a mistake while filing an ITR, there are certain rules and regulations you need to comply with to make the specified changes. Earlier, taxpayers had a 2-year window to check and resubmit faulty ITRs. However, the government recently decreased this window to 12months from the end of the financial year. Hence, the earlier you file your returns, the longer is your window for revising your returns and rectifying errors, if any.

Interest At The Tax Amount

When a person or company fails to pay their income tax return on time, they’ll have to pay an interest of 1% per month until they file their ITRs. The said interest is payable at the tax payable after reducing the tax deducted at source, tax collected at source, advance tax, and different tax credits available under the law. TDS is deducted by the way of the purchaser or payer at the same time the TCS is accumulated by the means of receiver/seller.

No Carry Forward Of Losses

If an ITR isn’t filed within the due date, the taxpayer will no longer be allowed to carry forward any loss under the head of ‘profits and gains of business or profession’ or ‘capital gains. However, unabsorbed reduction and loss under the head’s income from house property shall be entitled to be carried ahead.

Delay In The Method of Return Of Income

Once the return is signed and filed, similar is processed and double-checked by the Income Tax department’s central processing centre in Bengaluru. It is only after this confirmation that the tax liability or refund of the taxpayer is defined. Therefore, in case the taxpayer is claiming a refund, the delayed filing of the income tax return will result in a delayed receipt of the tax refund

What Are the Current Income Tax Rates for Taxpayers?

Taxable Income Range (in ₹)Tax Before 2020 (Existing)Tax Post Budget 2020
Up to 2.5 lakhsExemptedExempted
Between 2.5 and 5 lakhs5%5%
Between 5 and 7.5 lakhs20%10%
Between 7.5 and 10 lakhs20%15%
Between 10 and 12.5 lakhs30%20%
Between 12.5 and 15 lakhs30%30%
Above 15 lakhs30%30%

Rules changed because of COVID

Due to  COVID, the Government has extended the ITR Declaration up to 10th January 2021 from 31st December 2020.

In summary, citizens and businesses may face penalties for failing to file an income tax return. To avoid this, all individuals must pay their income tax fees promptly. Failure to file an income tax return is a serious crime and people should be aware of the humiliation of this crime