Why you must file your returns now and not wait till September 30
You are supposed to clear your tax liability by the end of the financial year, or else the dues attract penal interest.
Last week, we were informed that the Income Tax Return (ITR) software has been rectified and that a taxpayer is not required to pay late fee to file returns till September 30, 2021. The issue came to light when many taxpayers tried to file their ITR post July 31 (the original due date) and were asked to pay a late fee.
This should not have been the case, as the due date for filing of income-tax return for the financial year 2020-21 (Assessment Year 2021-22) was extended by the Central Board of Direct Taxes (CBDT) to September 30, 2021.
But it would be beneficial to file the return now instead of waiting till the last day of the extended period. Here’s why.
Avoid penal interest
You are supposed to clear your tax liability by the end of the financial year, else the dues attract penal interest. “Although the CBDT has extended the due date for filing of ITR, no relief has been provided from the interest chargeable under Section 234A if the tax liability exceeds Rs 1 lakh. The interest under Section 234A is computed at the rate of 1 percent a month or part thereof from the date immediately following the due date of filing of return of income and ending with the date on which return of income is furnished,” says Naveen Wadhwa, DGM, Taxmann.
Section 234A deals with the penalty for delay in filing the return of income. “Therefore, if the self-assessment tax liability of a taxpayer exceeds Rs 1 lakh, he would be liable to pay interest under Section 234A from the expiry of original due date, i.e., July 31, till the date of filing of return of Income. Thus, taxpayers should pay their taxes and file their income tax return well within time,” added Wadhwa.
So, if you haven’t filed your return yet and there is a pending tax liability of say Rs 1.5 lakh, you will have to pay Rs 1,500 as interest every month till you file the return.
However, some experts are of the view that the government should also exempt interest on due taxes. “Considering that lot of taxpayers are not able to file ITR this year due to technical glitches in the new IT portal, the Government should provide exemption from payment of interest u/s 234A this year, even if the ITR is filed after 31 July 2021 and self assessment tax exceeds Rs 1 lakh,” says Shailesh Kumar, partner, Nangia & Co LLP.
Faster processing of return and refunds
Once you file your return, the IT department processes your return by cross verifying the available information. Once the return is processed, an intimation cum notice is issued to the taxpayer stating that the return has been processed.
In case there is a mis-match in the return filed by the taxpayer and information available with the department, the notice mentions the differences and asks for rectification or clarification. If there are no differences, refunds get processed. This process can take weeks or even months. “Timely filing of returns means early processing and early receipt of refunds. It was observed even last year that individuals who filed their returns early and had their bank accounts pre-validated on the income tax portal received surprisingly timely refunds,” says Wadhwa.
Avoid last-minute glitches
Often technical glitches affect the functioning of the income tax portal, restricting taxpayers and practitioners from carrying out tax-related works. During the last few days of the return filing deadline, people face more problems. This is why it is advisable to file the ITR in advance.
“Especially, now when all TDS filings are complete and TDS certificates have been issued by employers and other deductors, everyone can easily avoid last minute rushes for their tax filings,” says Wadhwa.
So, collect all your tax filing related documents and file your return. If you are a salaried individual and do not have income from other sources, you can easily file it yourself.