Tax Club

Penalties Charged for Late Filing of ITR

Created on 16 Jan 2021

Wraps up in 6 Min

Read by 3.9k people

Updated on 11 Sep 2022

ITR filing

A lot of people seem to assume that filing tax returns is elective and therefore disperse it as unnecessary and burdensome. But a lot of individuals are not aware that this is not a very healthy perspective on tax-filing.

The Government of India imposes a tax on the taxable income of all the people who are eligible to pay tax.

Taxes are one of the primary and important sources of income for the government, which uses this collected funds for the country's development activities like defence, healthcare, infrastructure, education, and launching various welfare schemes for the masses.

As income tax is a certain portion of a taxpayer's income, that is why the government offers several benefits to the taxpayers for their contribution to the country. However, there are also several penalties that individuals need to pay if they do not file the ITR on or before the due date.

Let's take a detailed look into ITR along with its benefits and understand what will happen if one fails to file an ITR.

What is an ITR?

Income Tax Return is a form in which a person gives information about his income earned and tax applicable to the income tax department. The income tax department has circulated 7 various forms of income tax that taxpayers have to file an ITR mentioning which income tax slab they fall in, till the due date.

It is important to note that every taxpayer should pay their tax on or before the specified due date.

Who Should File ITR?

Every individual whose annual gross income is more than the basic exemption limit specified in the table below should file for ITR.



Individuals below 60 years

Rs. 2.5 Lakh

Individuals above 60 years and below 80 years

Rs. 3 Lakh

Individuals above 80 years

Rs. 5 Lakh

Which Tax Return to File?

Every taxpayer has to file an ITR according to the tax slab they fall in. The income tax department circulates various types of ITRs depending on various tax slabs.

Take a look at them to identify which tax slab you fall in.

1. ITR-1: Indian Resident having income up to Rs. 50 lakh from - Salary/Pension, Other sources (including Agricultural Income up to Rs. 5,000), and one house property.
2. ITR-2: Individual and HUF (Hindu Undivided Family) having a total income of more than Rs. 50 Lakh from - Capital Gains, More than one house property, foreign income/foreign assets, holding directorship in a company, and holding unlisted equity shares.
3. ITR-3: Individual and HUF having income from - Every income from ITR-2, Business/profession (presumptive income more than Rs. 50 lakh), and as a partner in a firm.
4. ITR-4: Individuals, HUFs, and Firms (other than LLP) being a resident having total income up to Rs.50 lakhs and having income from business and profession which is computed under Section 44AD, 44ADA or 44AE of the Income Tax Act, 1961. If the turnover of the business is more than Rs. 2 crores then taxpayers will have to file the ITR-3.
5. ITR-5: Partnership firms, business entities such as LLPs, AOPs, and BOI are applicable to file ITR-5.
6. ITR-6: Companies file income from business/profession and any other source of income. Or companies not claiming exemption under section 11 are applicable to file ITR-6.
7. ITR-7: Persons, charitable companies, scientific research associations, political parties, hospitals, news agencies, trade unions, universities, NGOs, or Similar are applicable under ITR-7.

Penalties Charged if ITR not Filed

Last date for taxpayers to file ITR of the assessment year 2020-2021 was extended to January 2021 for the individual taxpayer. Delaying the filing of ITR can lead to the penalty, but there are other consequences and inconveniences associated with it as well.

Let's have a detailed look into it:

1. Penalty Under Section 234F

Failing your ITR can lead an individual to pay the maximum penalty of Rs. 10,000. This penalty comes under section 234F of the Income Tax Department, which came into effect on 1 April 2017 to avoid delay in ITR filings.

If the taxpayer files the ITR for the financial year of 2019-20 on or before 10 January (excluding the audit and transfer cases), there will be no penalty. But after 10 January, there will be a maximum penalty of Rs. 10,000.

There is some relief for small taxpayers from the Income Tax Department.

2. Late Filing Fee Details

E-Filing Date

Total Income Below Rs. 5,00,000

Total Income Above Rs. 5,00,000

10th January 2020

Rs. 0

Rs. 0

Between 10th January 2021 to 31st March 2021

Rs. 1,000

Rs. 10,000

  • Less Time for Revising Return

Filing an ITR on the due date can lead to making an error in the taxpayer's form as the taxpayer fills in the form in such a hurry. Under the changed rules, taxpayers have time till the end of the financial year to correct their mistakes.

But, if the taxpayer files the ITR on the due date, then there will be no time to make any corrections. That is why if a taxpayer files the ITR earlier, there will be a window of a year to check your return for errors if any.

3. Interest On Payments

If the taxpayer does not file the ITR on or before the due date, the taxpayer is required to pay 1% of the interest rate every month on the amount of tax remaining under section 234F of the IT Department. And the penalty will start immediately after the due date, which is usually 31 July of the relevant assessment year. Currently, for the financial year of 2019-20, the due date was 10 January.

Taxpayers are not allowed to carry forward their loss if they do not file the ITR on or before the due date.

In case a taxpayer is eligible to receive a refund from the IT Department for the excess taxes they have paid, they need to file the ITR on or before the due date to receive the refund.

Additionally, paying the tax on time has several benefits that many people are not aware of.


Benefits of Filing an ITR on Time

In India, the majority of the population belongs to the middle class, and their annual income is quite limited. Because of this, many people assume that paying income tax will be an unnecessary burden on them, and it means they are not required to file the income tax return.

However, they are not aware of the fact that filing an income tax return also comes with several benefits. Let's have a detailed look at the key benefits of filing for income tax returns.

1. Helps Taxpayer to Avail Loans From Banks - When individuals apply for a loan (home loan, car loan, education loan, personal loan, etc.) in banks or financial institutions, in order to make sure that they will be able to pay EMIs of the loan and provide an income proof, banks ask for a 3 years income tax return statement. If an individual has filed the income tax returns, it becomes easier for him to get the loan approval easily.

2. Helps Taxpayer To Get Income Tax Refund - Suppose you are an employee at a big company and the company has deducted the excess TDS (Tax Deduction Source) by default. To claim the refund, the employee will need to file ITR.

3. ITR works as a Taxpayer's Income Proof - An ITR statement can also work as an income proof of a taxpayer.
For instance, suppose you wish to apply for a scholarship program for your children, in that case, it is mandatory to show your ITR as proof of your income to the financial institution.

3. Carry Forward Capital/Business Loss - Filing an ITR also facilitates carrying forward any capital or business losses the individual must have borne.
For instance, suppose you traded in shares and faced loss in a particular period. In this case, you can carry forward the loss to the next year by filing an ITR.

4. KYC Compliance of Current Account - To complete the KYC process of the current account, an individual needs to submit their ITR filing of the last 3 years.

5. Helps in Quick VISA Process - Most consultancy & embassies require you to give them the last few years of your ITR statement in order to approve your application.

The Bottom Line

Filing income tax returns is seen as an ethical and social duty of every responsible citizen of the country. Filing the ITR on time comes with several benefits to the taxpayer. 

Additionally, the government also gives relief to taxpayers from time to time. Keeping the current troublesome times of the pandemic in mind, the deadline for filing ITR has also been extended.

As the saying goes "deadlines aren't real until they're staring right in your face!". So, it is better to file the ITR earlier to avoid penalties and make corrections in your ITR if any.

"Filing Income Tax Return is not an obligation; rather it is the responsibility of every individual"

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Divyanshu Kumar

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Divyanshu did his post-graduation in Financial Economics, and that's when he realized that writing about finance interests him the most. He has been writing finance content for two years and considers himself a coherent and confident writer. As a Finance content writer, he reads a lot about the subject and makes sure he is up to date with the latest updates in the market. Besides that, he is passionate about fitness and works hard to maintain a healthy lifestyle.

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