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What happens if you miss the income tax filing deadline?

What happens if you miss the income tax deadline?

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The last day for the filing of income tax returns for the financial year 2021-22 is July 31, 2022, for individuals whose accounts need not be audited. The tax filing deadline for the taxpayers whose accounts are to be audited is October 31, 2022.

In case you miss the Income tax filing deadline of 31 July you can still file the return by December 31, 2022, but you will be required to pay a late fee.

The late fee for persons whose annual income is up to Rs 5 lakh is Rs 1000 and for the individuals whose income is more than Rs. 5 lakh is Rs. 5000. For the persons whose gross income does not exceed the basic exemption limit they are not required to pay the late filing fee.

The exemption depends on the tax regime chosen by you. In the old income tax regime, the exemption income is Rs 2.5 lakh for taxpayers below 60 years of age, Rs 3 lakh for persons between 60 and 80 years of age, and Rs 5 lakh for persons above 80 years of age. In the new income tax regime, the tax exemption limit stands at Rs. 2.5 lakh, irrespective of age.

In case there is an unpaid income tax after July 31, 2022, an interest of 1 percent is applicable on the outstanding amount, and if the outstanding tax is paid after the 5th of any month, the interest for the full month has to be paid.

What are the benefits of filing income tax returns on time?

There are many benefits of filing the income tax returns on time-

1) Address Proof-

The ITR receipt can be used as proof of residency as it is sent to your registered address.

2) Avoid penalty and extra interest-

If you miss the ITR deadline you have to pay the late fee of Rs. 5000. There may be an additional interest of 1% per month on the tax that you owe.

3) Loan approval is easy-

A person who pays the tax regularly has it easy getting loans approved from lenders. To approve the loans the financial institutions look for the previous year’s ITR to verify their income. A home loan application may be rejected if you are not able to present any documentation that includes the ITR.

4) Compensate for the losses in the next financial year-

When the returns are filed before the deadline the losses can be carried over to the next fiscal year. The taxpayers thereby have to pay less tax on their future income. As an example- if you have made a profit on the sale of stocks you can offset it with the losses from previous years. Similarly, if you have made a loss this financial year you will be able to offset it with the gains of the next financial year. This is possible if you file the returns on time whereas the unadjusted losses can’t be carried forward if the returns are not filed on time.

5) Processing of credit cards-

Banks can reject your credit card application if you have not filed your ITR as it is one of the primary documents that need to be furnished if there are problems with other income proofs.

6) Visa Application-

The visa authorities of many countries require the ITR as one of the documents for issuing a visa. The embassy can verify the income of the applicant and know if they are financially capable of covering the expenses. The consulates can ask for the last three years’ ITR or the current year’s ITR. The embassies of the United States, Canada, Europe, and the United Kingdom are particular about tax compliance.

7) Most credible proof of Income-

ITR serves as the most credible proof of income. The salaried employees are issued Form 16 which serves as verification of their income. For the self-employed, the ITR serves as proof of income which gives the breakdown of their revenues and expenses. Form 16 is not issued to the freelancers and they may have issues regarding financing if they don’t have the ITR.

8) Buying an insurance policy with a higher cover-

The insurance companies will not issue you plans if they believe you are a tax evader. If you happen to purchase term insurance of Rs. 50 lakh or more the insurance company will ask for the ITR receipt as the amount insured by a policy is determined by various factors and one of which is the income of the person.

9) Applying for government tenders-

There are persons who wish to apply for government tenders. The returns of these persons should be accurate and audited which is essential in applying for a government tender. The tender scrutinizing persons may check the returns of the last five to seven years and if the returns are not filed on time or not filed at all they may not succeed in their bidding.

There are so many benefits of filing the tax returns on time so it is wise not to miss the income tax filing deadline.

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