Each year, you need to file your Income Tax Returns on time. The last date for filing income tax returns is July 31. However, sometimes the government extends the same depending on the situation.
While it is a good idea to file returns on time many suggest that you should do so much earlier than the July 31, 2015 deadline as you could receive your refund early as well.
Here is what could happen if you file your income tax late.
Interest on late filing of tax returns
If you file you tax returns beyond the stipulated time frame you are liable to pay an interest. The interest has to be paid at the rate of 1 per cent per month. For those who have paid advance tax the interest may not be applicable.
You cannot carry forward losses
You cannot carried forward losses if you pay your advance tax beyond the stipulated time frame of July 31. Let's say you buy shares worth Rs 2 lakhs and sell the same for a loss of Rs 1.5 lakhs.
You cannot carried forward the losses as you have not filed your returns on time.
Did you know that you have to pay advance tax, if your TDS is not being deducted. Let's say if you have substantial incomes, then the government loses out by collecting income tax money only at the end of the year. For example, the tax payable on substantial income in April 2015 would fall due only by July 31, 2016.
The government thus loses out. Therefore, individuals whose TDS is not getting deducted have to pay an advance tax.
You have to calculate your income tax and pay 30 per cent as advance tax by Sept, 60 per cent by December and the entire 100 per cent by March.
Tax refund likely to be delayed
The longer you take to file your tax returns, the longer it would take for the Income Tax department to process your refund. You would lose on this count especially if you have a large refund that is due.
Ideally, you should meet up with your Chartered Accountant or one who files your tax returns to ensure that it is done on time.
Ability to rectify your returns
In case you have filed your tax returns very late, there is no opportunity to rectify your tax returns in case there was a mistake in the tax returns. This may or may not happen, but at least it given you an opportunity, just in case.
It's best to file your tax returns on time due to the numerous disadvantages of filing a delayed tax returns. Remember, the onus to file tax returns is on you and not on the income tax department.
Maybe if you are in the habit of preparing a yearly calendar of things to do, you could include this and keep the July 31 deadline in mind.