File Tax Returns in Time, Save Trouble

Last date for filing returns is July 31. Any delay can cause problems ranging from loss of benefits to payment of interest, says Vidyalaxmi     The due date for filing tax returns for the financial year 2011-12 for most individuals is July 31. As the due date comes closer, everyone will advise you to file tax returns within the due date.  Though tax returns can be filed belatedly, before the end of the relevant assessment year (March 31, 2013, for the tax year 2011-12), without any penalty, it would be better to do it by the due date — July 31.  "In case there are any taxes payable (after considering TDS, advance taxes and other credits available), any failure to file the returns of income within the due date would attract interest at the rate of 1% per month for the delay in filing the returns," says Amarpal Chadha, tax partner, Ernst & Young. The delay in filing the returns will also increase the interest payable for default in the payment of advance tax.  Here are some reasons why you should consider filing your tax returns before the due date.  THE RIGHT TO CARRY FORWARD  LOSSES  The loss under the head 'Profits and Gains of Business or Profession' (other than depreciation loss) cannot be carried forward if the returns is filed late. "However, one can still set-off the losses against the income (other than income under the head salary) under other heads of the same year," says Vaibhav Sankla, director, H&R Block India. This also applies to any shortterm or long-term capital loss from sale of shares. "The same can be carried forward and set off against capital gains/business profits, which may arise in the next eight years. However, if the tax returns are not filed by the due date of July 31, 2012, the above benefit will not be available," says Chadha of Ernst & Young. REVISION OF TAX RETURN  Returns filed after the due date would be considered belated tax returns. Under the law, belated tax returns cannot be revised. Some details may not be available by the due date. "In such cases, the Act allows the filing of 'belated returns' within one year from the end of the assessment year or completion of assessment, whichever is earlier," says Vineet Agarwal, director, KPMG. However, you will have to forgo the right to carry forward your losses or revise the return. "In such a case, you can file a return with the due date and then revise it with actual details, subject to certain conditions," he says.  However, if you file the return within the due date, you will have a option to revise it later. Moreover, in case you want to claim foreign tax credit based on foreign tax return received later, you will not be able to do so if the original tax return is filed after the due date.  PREVENT DELAY IN PROCESSING OF REFUNDS  In general, the earlier you file the return, the earlier you receive the refund. If the return is filed late, there will be a delay in the refund. Further, the interest on refund, wherever applicable, is also reduced to an extent if the return is filed late.  ACCESSIBILITY TO IT DEPT PORTAL  To file a return in time, it is important that the return preparation process is initiated well before the due date. This is because most people start it late which puts pressure on their tax advisor. "For the tax payer, it means that his tax advisor may not be able to give full justice to his tax return and, unfortunately, to file the return in time becomes his only focus.  Lastly, for the same reasons, the e-filing portal of the income tax department at times virtually becomes inaccessible during the last 2-3 days before the due date," says Sankla.  AVOID INTEREST LIABILITY  Interest is levied if the tax return is not filed by the due date. This is besides the other interests levied under various sections of the Income-tax Act, 1961, ('Act').  "As per Section 234A of the Act, an interest is levied at 1% per month on the tax payable, from the due date of filing the return to the actual date of filing, subject to certain conditions. Hence, filing the return within the due date can help avoid this interest liability," says Vineet Agarwal.  The due date for filing tax return for the year 2011-12 is July 31. However, the belated tax return can be filed up to March 31, 2014. "Revenue authorities have the powers to levy a penalty of Rs 5,000 if the tax returns are not filed within March 31, 2013 (penalty can be levied for the returns filed between April 1, 2013, and March 31, 2014)," says Amarpal Chadha.  If You Miss I-T Returns Deadline…  You cannot carry forward losses (other than losses under the heads 'house property' and depreciation)  If you come across an error in the return filed, you cannot revise it later  You may have to pay interest under section 234A for late filing of return  You may receive a reduced amount of interest on your refund. You may receive the refund late due to late filing of return  If you delay filing beyond the end of the assessment year, the tax offi cer may levy a penalty of up to 5,000  You may not be able to file the return at all after a year from the end of the assessment year