Why It’s Beneficial to Delay Filing Your Income Tax Return

Income Tax Return

Why It's Beneficial to Delay Filing Your Income Tax Return

About 23,000 taxpayers filed their income tax returns (ITRs) for  AY 2024-25 (FY 2023-24) within the initial three days. This followed the Income-tax Department’s new initiative of opening return filing utilities on its portal from April 1, 2024, the first day of the assessment year.

Income Tax Return

Approximately 23,000 taxpayers submitted their income tax returns (ITRs) within the first three days of Assessment Year (AY) 2024-25 (Financial Year 2023-24) after the Income-tax Department launched return filing utilities on its portal from April 1, 2024, marking the first day of the assessment year.

In contrast, the previous year’s return filing process was delayed, with filing functionalities becoming available on the IT portal only in May. Salaried individuals (ITR-1) and individuals, HUFs, and partnership firms with income from business or profession (ITR-4) could start filing from May 20, 2023. The utility for individuals and HUFs with income other than business or profession (ITR-2) was accessible from May 30, 2023.

Current Eligibility and Locations for Filing Income Tax Returns

The Income Tax Department, operating under the Central Board of Direct Taxes (CBDT), has activated the filing features for popular categories including ITR-1, ITR-2, and ITR-4. Taxpayers can now submit their returns online at https://eportal.incometax.gov.in/iec/foservices/#/login

The Income Tax Department announced on Thursday (April 4) that the e-filing portal now supports filing functionalities for commonly used ITR forms – ITR-1, ITR-2, and ITR-4 starting from April 1, 2024. Additionally, companies can file their returns using ITR-6 from the same date. The statement mentioned that the ability to file ITRs using forms 3, 5, and 7 will be rolled out soon.

According to the Department, this marks the first instance in recent years where taxpayers have the opportunity to file their returns on the initial day of the new financial year. The Department also stated that this advancement represents another significant stride towards enhancing compliance convenience and providing seamless taxpayer services.

Is It Necessary to File My Income Tax Returns Right Away?

Based on tax department data, as of April 3, a total of 22,599 returns have been filed for Assessment Year (AY) 2024-25. Among these, 20,868 returns for AY 2024-25 have been verified, and 2,907 verified ITRs have been processed.

Nevertheless, tax professionals have highlighted that the Annual Information Statement (AIS) and Form 26AS are not refreshed until March 31, 2024, the closing day of the previous financial year. They recommended that taxpayers wait for the AIS and Form 26AS to be updated before completing their tax returns to prevent potential discrepancies in filings at a later stage.

Understanding the Significance of AIS and Form 26AS in Income Tax Filing

The Annual Information Statement (AIS) is a comprehensive summary of a taxpayer’s financial transactions, encapsulated in Form 26AS. This form includes crucial details such as Tax Deducted or Collected at Source (TDS/TCS), as well as information on interest, dividends, and transactions related to the stock market and mutual funds.

During the income tax filing process, taxpayers can access the detailed summary provided by the AIS and Form 26AS. They have the option to either confirm the accuracy of the information or report any discrepancies encountered.

Why Has This Information Been Delayed?

Due to the nature of AIS, which captures financial transaction details from reporting entities like banks and financial institutions, the information becomes accessible only after updates are received from these entities.

Likewise, Form 26AS undergoes updates following the processing of TDS returns by the income tax department.

Given that the deadline for filing TDS returns for the January-March quarter is May 31, the updated information becomes available only in the initial week of June. Consequently, experts caution that filing returns without verifying AIS/Form 26AS could lead to errors and potentially result in notices due to incorrect income reporting.

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Late Filing Penalty under Section 234F of the Income Tax Act for the Financial Year 2023-24

Late Filing Penalty

Late Filing Penalty under Section 234F of the Income Tax Act for FY 2023-24

Deadline for Individual Taxpayers to File AY 2024-25 (FY 2023-24) ITR is July 31, 2024. Late filing incurs penalties and other inconveniences.

Late Filing Penalty

For individual taxpayers, the deadline to submit your ITR for AY 2024-25 (FY 2023-24) is July 31, 2024, unless extended by the department. Failure to file on time can result in penalties, along with additional repercussions and inconveniences.

Late Filing Penalty under Section 234F

Under the amended regulations in Section 234F of the Income Tax Act, filing your ITR after the deadline can result in a maximum penalty of Rs. 5,000.

Starting from the fiscal year 2021, the income tax department has reduced the maximum penalty for late filing of returns to Rs. 5,000 from Rs. 10,000.

Breaking it down for FY 2023-24; if you file your ITR before July 31, 2024 (September 30, 2024 for audit and October 31, 2024 for transfer pricing cases), no penalty will be imposed.

For filings after July 31, 2024, the penalty ceiling will be raised to Rs. 5,000. However, in a relief to small taxpayers, the IT department has stipulated that if your total income does not exceed Rs. 5 lakh, the maximum penalty for delay will be only Rs. 1,000.

Late Filing Fee Details

e-Filing DateTotal income below Rs 5 lakhTotal income above Rs 5 lakh
31st July 2024Rs 0Rs 0
Between 1st August 2024 to 31st December 2024Rs 1,000Rs 5,000

Shortened Timeframe for Amending Your Return

Late Filing Penalty

Suppose you’re submitting your ITR and find an error. With the revised rules, you must correct it by December 31 of the assessment year (for ITRs from FY 2017-18). Previously, taxpayers had a 2-year window to revise ITRs. This has now been reduced to 9 months from the end of the financial year. Hence, filing earlier gives you a longer window to revise and rectify any errors in your returns.

Interest Payment

Failure to file income tax returns by the due date incurs interest at a rate of 1% per month, or part thereof, on the outstanding tax amount according to section 234A. It’s crucial to understand that ITR filing is contingent upon tax payment. Penalty calculation begins from the day following the due date, typically July 31 of the relevant assessment year. Hence, delaying payment results in higher penalties.

Loss Carryforward is Prohibited

If you’ve experienced losses during the year, such as capital gains or business losses, ensure you file your return by the due date. Failure to do so will prevent you from carrying forward these losses to offset against income in future years. However, losses from house property can still be carried forward to future years, even if you file after the due date.

Refunds Not Received Right Away

If you’re eligible to receive a refund from the government for overpaid taxes, it’s essential to file your return before the deadline to expedite the refund process.

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What are the differences between income tax and tax deduction at source?

income tax

What are the differences between income tax and tax deduction at source?

income tax

The two phrases that Indian taxpayers encounter most frequently are income tax and tax deducted at source (TDS). Despite their apparent similarities, they are very different from one another. The primary distinction between TDS and revenue Tax is that the former is subtracted from the taxpayer’s annual return or total profit, while the latter is subtracted from the payer’s revenue sources in accordance with the anticipated tax burden. Furthermore, the mechanisms for collecting both taxes are different.

Income Tax

Income tax is a levy imposed on the yearly income a person or business earns within the fiscal year. The Income Tax Act of 1961, which establishes the guidelines for tax assessment, computation, and collection, governs it. It covers a variety of income streams, including capital gains, earnings from real estate, profits from a career or business, and salaries. Anyone making more than Rs. 2.5 lakhs (under the previous tax system) or ₹3 lakhs (under the current tax regime) must pay income tax; failing to do so is penalized by law as tax evasion.

  • Anyone earning more than ₹3 lakhs (new tax regime) or 2.5 lakhs (old tax regime) annually
  • For senior citizens who are more than 60 years old and less than 80 years old, the limit is 3 Lakhs
  • For senior citizens who aged more than 80 years, the limit is 5 Lakhs

Tax Deduction at Source

  • When tax is withheld from an individual’s primary source of income and sent straight to the government, it’s known as tax deducted at source, or TDS. When making certain payments, such as salaries, interest, rent, or professional fees, people or organizations are required by law to deduct a predetermined proportion of taxes from the payment amount. This is known as TDS. It is essential for stopping tax evasion and makes the process of collecting taxes easier.

    • Salary Payment
    • Revenue from Rentals and Investments
    • Cash obtained from winning lotteries, games of chance, prizes, puzzles, and related activities.
    • Insurance commissions
    • Contractor payments, brokerage fees, commissions, and other expert costs
    • Payments from a number of sources, including the National Savings Plan.
income tax

Differences between Income Tax and TDS

  • TDS is deducted at the source of income throughout the year, whereas the taxpayer pays Income Tax at the end of the financial year.

  • The payer (employer or financial institution) deducts TDS and remits it to the government, while the taxpayer directly pays Income Tax after calculating their tax liability.

  • TDS tax rates are determined by the government based on the nature of payment, with no payer intervention, whereas Income Tax rates depend on income slabs outlined in Tax Laws.

  • TDS applies to payments such as salary, interest, rent, professional fees, etc., while Income Tax is imposed on the total annual income, including salary, capital gains, etc.

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