Article
Is it illegal to not file ITR?
There are a lot of people who consider tax filing as a tedious task or they are not aware of the benefits of filing Income Tax Return and hence they end up not filing Income Tax Return. Well, that is the reason why we will tell you the consequences of not filing Income Tax Return.
Is it illegal to not file ITR?
There are a lot of people who consider tax filing as a tedious task or they are not aware of the benefits of filing Income Tax Return and hence they end up not filing Income Tax Return. Well, that is the reason why we will tell you the consequences of not filing Income Tax Return.
Consequences of not filing ITR
- Under Section 142(1) of the Income Tax Act, 1961, the Income Tax Department will issue a notice to you, if you do not file your Income Tax Return. If you still fail to file your tax return, even after the notice has been issued, you will be required to file your IT Return along with an interest and a pre-determined penalty that is levied by the IT Department.
- As per Section 234A of the Act, an interest of 1% per month or part thereof will be charged till you file your tax return. Moreover, there may be also be a penalty of up to Rs.10,000 levied on you, as the case may be.
- Some of you might be filing your IT Return hoping to get a tax refund, in case you paid more tax than required either as advance tax or in the form of TDS and you fail to furnish your Income Tax Return in the current financial year, then you will not be able to claim tax refund against the extra tax paid by you to the Government of India.
- The main document that all financial institutions and/or banks require as proof is your ITR of the last 3 years, when you apply for a loan. Banks and/or financial institutions want to be well aware of your financial capacity which they determine by the receipts of the Income Tax Returns you file. If you do not file your tax returns on time, you might face issues in getting a loan.
- There is a very high possibility that you would be required to submit proof of your Income Tax Returns when you apply for a visa too. The visa authorities and the High Commissioners of various countries ask to produce a proof of income when you apply for a visa and the best proof of income in India is the Income Tax Return. Before issuing you a visa for any country, the visa authorities would want to make sure that, you are financially sound in your own country and can visit and spend your earnings in another country. If you are unable to produce even a single IT Return, your chances of getting the visa can be reduced significantly.
- If you are looking to expand your business by means of getting tenders, either from Government or private entities, you need proof of your IT Returns. The value of business of various corporate agencies, contractors, professional service providers or individuals depends majorly on the Income Tax Return. Sometimes the tender scrutiny committee might check the work and demand for IT Returns filed for the last 5-7 years.
- Usually, when you file your tax return regularly, you can set off your losses against the gains of the forthcoming years. For instance, if your business has incurred loss this year, you can set off this loss against the profit of the business in the subsequent year. However, if you fail to file your Income Tax Returns on or before the due date, you will not be allowed to carry forward your losses to the next financial year.
- The Supreme Court of India has declared that all taxpayers are liable to file their Income Tax Return and failing to do so may also lead to prosecution. As per Section 139 of the Income Tax Act, 1961, you are required to file your IT Returns voluntarily. If you fail to do so, the first warning is sent by the Income Tax Department in the form of a notice sent under Section 142 and 148 of the IT Act, but if you still do not file your tax return, the Government can prosecute you under Section 276CC of the Income Tax Act, 1961. The judgement passed by the Supreme Court in this case has to be taken as a firm reminder that the laws cannot be taken so lightly. If the Supreme Court holds a proceeding for your case, you will be required to provide legitimate reasons for not adhering to the filing compliances.
- If you have an assessable income and you still fail to file your IT Return, you will be charged with a penalty for concealment of income which can range anywhere between 100% to 300% of the tax amount which is levied under Section 234A of the Income Tax Act, 1961.
Always make sure that you file your Income Tax Return, even if you have no income. It will only be beneficial for you in different situations.
