If you've missed July 31 deadline, file a belated ITR: What you should know

However, you will have to pay a penalty and won't be able to carry forward losses under certain heads

Taxpayers who missed the July 31, 2022 deadline for filing Income-Tax Return (ITR) may file a belated return. A belated return can be filed for a previous year at any time three months before the expiry of the relevant assessment year, or before completion of assessment, whichever is earlier. Hence, the effective date for filing a belated return for Assessment Year (AY) 2022–23 is December 31, 2022.

Consequences of late filing

In Budget 2021, the government reduced the time limit for filing belated ITR from March 31 to December 31.

Deepak Jain, chief executive, TaxManager.in says, “An amendment has been made in Section 234F. The maximum penalty of Rs 5,000 will be levied if ITR is filed by December 31. If the taxpayer’s total income is less than Rs 5 lakh, the penalty won’t exceed Rs 1,000.” Those who file a belated return after December 31 will have to pay a higher fine of Rs 10,000.

A taxpayer who files a belated ITR loses several benefits. Soayib Qureshi, associate partner, PSL Advocates & Solicitors, says, “The taxpayer can’t carry forward the losses arising from capital gains or from business or profession.”

Losses can’t be carried forward even if taxes were paid on time. Jain says, “The exception to this rule is loss from house property, which can be carried forward even in the case of a belated return.”

Qureshi adds, “The taxpayer will also have to pay interest under Section 234A at 1 per cent per month, or part thereof, on tax due until the payment of taxes.”

If the assessee is entitled to refund out of the taxes prepaid during the financial year (such as tax deducted at source, tax collected at source, or advance tax), interest on the refund is computed from April 1 of the relevant assessment year if ITR is filed on time. Naveen Wadhwa, deputy general manager, Taxmann, says, “In the case of a belated return, interest on refund is calculated from the actual date of filing of return.”

Big trouble for serial non-filers

Serial non-filers may have to face serious consequences. Wadhwa says, “They will not be granted tax refund. Interest and late fees will be levied. Prosecution could be launched under Section 276CC. They could also be subjected to higher TDS.”

A proposal was introduced in last year’s Budget, according to which non-filers (who had not filed their tax returns in the two years immediately before the one in which tax is to be deducted) will have to pay TDS at 5 per cent or twice the normal rate. Wadhwa says, “In financial year 2022–23, TDS will be levied at a higher rate if the taxpayer has not filed the return for AY 2021–22 (financial year 2020–21), and that person’s aggregate of tax deducted and collected at source for 2020–21 is Rs 50,000.”

A person who couldn’t file ITR in previous years due to genuine difficulty can apply for condonation of delay and file ITR once he gets the permission.

Updated ITR

The Finance Act 2022 inserted subsection (8A) in Section 139 to enable the filing of updated return, which has a bearing on belated ITRs. Suresh Surana, RSM India says, “Under Section 139(8A) of the I-T Act, any person, whether or not he has furnished a return, may furnish an updated return of his income, or the income of any other person in respect of which he is assessable under the I-T Act, within 24 months from the end of the assessment year, subject to certain conditions and on payment of additional tax.”

Maneet Pal Singh, partner, I.P. Pasricha & Co says, “ITR-U (U stands for updated) can be filed for the last two years whereas belated return relates to a specific assessment year. An assessee who files a belated return can claim a refund. One who files ITR-U can’t.”

Things to note

While furnishing belated ITR, select the option ‘Filed under Section 139(4)—After the due date’. Remember that a belated return filed under Section 139(4) can be revised.

Difference between updated & belated ITRs

Updated return

• An updated income tax return can be filed within 24 months from the end of the assessment year 
• The updated return can't be a return of loss
• A person can file an updated return,  irrespective of whether he has or hasn't furnished an original return
• An updated ITR can't be filed in certain cases where search and seizure, etc. have been initiated
• Additional tax is applicable on filing of updated return

Belated return

• A belated return has to be filed on or before three months prior to the end of the relevant assessment year, or completion of assessment, whichever is earlier 
• In case of a belated return, it can be a return of loss 
• A person can only furnish a belated return provided he hasn't furnished the original return within the due date under Section 139(1)
• No additional tax liability is applicable on filing of an updated return (only additional interest under Section 234A and late fees under Section 234F)
• No such restrictions apply in the case of filing belated returns