Filing Income Tax Returns (ITR) is mandatory for all Indian citizens and entities that have taxable income. Failure to file ITR can result in various consequences, both legal and financial. Here are some of the consequences of not filing ITR in India:
Penalty: The Income Tax Department can impose a penalty of up to Rs. 10,000 for not filing ITR within the due date. If the return is filed after December 31 of the relevant financial year, the penalty can go up to Rs. 10,000. In case the taxpayer's income is less than Rs. 5 lakh, the maximum penalty levied will be Rs. 1,000.
Interest on unpaid tax: If the taxpayer has any unpaid tax liability, the Income Tax Department can charge an interest of 1% per month (or part thereof) on the unpaid amount.
Refund delay: If the taxpayer is eligible for a tax refund, not filing ITR can delay the refund process. The taxpayer may also miss out on the interest income that could have accrued on the refund amount.
Rejection of loan application: Banks and financial institutions may ask for ITR filings as a proof of income while processing loan applications. Failure to submit ITR can result in the rejection of the loan application.
Legal action: The Income Tax Department may take legal action against taxpayers who do not file ITR. In extreme cases, the taxpayer may even face imprisonment for up to 7 years, along with a fine.
Loss of carry forward losses: If a taxpayer incurs a loss in a financial year and does not file ITR, they may lose the opportunity to carry forward the loss to future years for set off against future gains.
It is important for taxpayers to file ITR on time to avoid the above-mentioned consequences. Even if a taxpayer has missed the deadline for filing ITR, it is advisable to file a belated return as soon as possible to minimize the penalties and interest charges. Taxpayers can also seek the help of tax experts to file their returns correctly and on time.
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