Remember that carrying forward of losses and revision in taxes would not be allowed
Every year, there is a last-minute scramble for filing tax returns among income-tax assesses. Many even forget filing it on time. Some think that as the tax has been deducted by the employers, returns can always be filed later. However, the latter two situations come at a cost. With July 31 approaching, it is important that returns be filed on time.
You are not allowed to carry forward any loss (business loss/speculative loss/ capital loss) if you miss the grace period for filing tax returns.
In case of capital loss, the Income Tax (I-T) Act allows you to either set it off against capital gains in the same financial year or carry it forward for the next eight years (adjusting it in parts against gains in those years). However, if you have not filed taxes before setting off the entire loss, you will be in trouble.
The relief is that the Act does not extend this clause to loss to residential property. Instead, it can be carried forward (after paying property tax and interest) for eight years by offsetting it against gains, albeit only from a housing property. It can also be set off in the same year against any other gains.
If you forget to file taxes for an assessment year, you have the next two years to do so (called the grace period). Say, you missed filing returns for 2008-2009. You will get time till March 31, 2010 and, after that, another extension till March 31, 2011. The grace period ends in March 2011. Not that you can't file returns after that. But, you will lose out on some benefits provided by the I-T department.
You will have to forfeit the interest on the refund pending for the period the returns have been delayed. If you have paid excess taxes, you are eligible for a refund. And, if the refundable amount is more than 10 per cent of the total tax payable, you are entitled for a simple interest of 0.5 per cent on that amount.
However, the interest earned is taxable under income from other sources. That is, the amount received is added to your income and taxed in accordance with the slab you fall under.
Another blow could be not being able to revise the returns when filing late. For instance, if you forget to show investments or expenses (exempted, like medical bills) to your employer by March 31, such additions can be made at the time of filing taxes. But, this cannot be done if you haven't filed taxes on time.
While delayed returns cannot be amended, there are specific instances where the courts have allowed late returns to be revised." When you miss filing returns for an assessment year, you get a year's breather. But, the leeway of a second year comes with penalties. That is, if the returns for 2009-10 are filed after March 31, 2011, there will be a flat penalty of `5,000, if there is no tax liability. In case of an outstanding, you may have to pay a penalty of one per cent per month on the amount.
There are two simultaneous charges levied under Sections 234(A) and 234(B). The former deals with a delay in filing returns and imposes an interest of one per cent a month from the August of the assessment year (2010 in this case). Section 234(B) deals with a delay in depositing advance tax and charges one per cent interest per month starting April 1, 2010, till the outstanding amount is paid. This is applicable to those with an outstanding tax liability exceeding `10,000.
The delay in paying advance tax will attract another one per cent interest for three months for the first three instalments and one per cent a month for the last one.
Ø Not allowed to carry forward any loss (business/speculative/capital)
Ø However, the Income Tax Act makes an exception of any loss on residential property
Ø Interest forfeited on refund due for the late period
Ø Returns cannot be revised when filing late
Ø If no tax liability, a flat fine of `5,000 is imposed
Otherwise, you have to pay a penalty of one per cent a month on the amount due