Failure to file income tax return even after becoming a tax liability can lead to many problems. Under the Income Tax Act, there can also be a jail term of up to 7 years.
If your income by way of salary, rent or any other means exceeds the purview of tax exemption, then it is mandatory for you to file income tax return. But sometimes it happens that some people do not file their tax return. Some people are not even aware about this. In such a situation, it is important for you to know what will happen if you have not filed income tax return. You may have to pay penalties ranging from late fees to many other types of penalties.
Late Fee: Every year the last date for filing income tax return is 31 July 2021. If you file ITR after this, then you have to pay Rs 5,000 as late fee. For the financial year 2020-21 (Assessment Year 2021-22), this time the government has extended the last date for filing ITR till 30 September 2021. The late fee for filing income tax return after December 31 of any year becomes Rs 10,000. However, if your total income is less than Rs 5,00,000 then you will have to pay a maximum penalty of Rs 1,000 only.
Penalty for not filing ITR: If you did not file income tax return intentionally or similarly and the Income Tax Department finds that you have not filed ITR even after paying tax, then you will have to pay penalty. If you have not filed ITR by mistake, then the penalty amount will be 50% of the total tax liability. If it is not filed intentionally then it will be 200 percent. You will have to pay this penalty on top of the tax liability.
Payment of interest: Apart from penalty, you will also have to pay interest at the rate of 1% on the tax liability. It is provided under section 234A of the Income Tax Act. You will have to pay this interest rate from the day the last date for filing ITR ends.
Fine and legal problems: If your tax liability is Rs 10,000 or more, then you can also go to jail. According to tax experts, non-filing of ITR despite having a tax liability of more than Rs 25,000 can lead to a jail term of 6 months to 7 years. Those with a tax liability of Rs 10,000 to Rs 25,000 can be jailed for a maximum period of two years. Apart from this, the court can also impose a fine on you.
Problem in getting loan: While applying for a home, car or personal loan in the bank, information about income tax return filing for the previous year is also sought. Banks ensure that you have the ability to repay the loan. If you do not file tax even after having more than the prescribed limit, you can be denied a loan.
Higher interest rate on business loan: Income tax return becomes even more important for business loan. Business loan can also be denied for not filing ITR. Even if a bank or financial institution agrees to give you a business loan, then the interest rate for it will be very high.
TDS will be deducted at double rate: New TDS rule has been implemented for assessment 2021-22. If you have not filed ITR in the last two years and every year your TDS is Rs 50,000 or more, then you will have to pay TDS at double rate.
Refunds will also not be available: Even if you do not file income tax return, but banks, mutual fund houses, employers and other such institutions have the right to deduct your TDS. In such a situation, if you do not become tax liability and your TDS has been deducted, then this refund will be given to you after filing income tax return. In such a situation, if you do not file ITR, then there may be a loss of this refund.
