Filing tax returns is every Indian citizen’s duty as long as they fall within the taxable income limits. Any individual assessee with an annual income of Rs.500,000 is obliged to file his/her returns. Normally, the last date for filing returns is the last working day of July after the financial year is completed. However, in most cases the last date for tax filing gets extended by at least a month. Remember, having taxable income, paying taxes and filing tax returns are different altogether. If you annual income is more than Rs.500,000 you will have to file returns even if you have no tax payable. Even if all your taxes are paid in the form of TDS by your employer, you still need to file your returns before the stipulated due date. So, what do you need to do if you skip the deadline? Let us look at some very specific cases and what happens in each of the cases if you miss out on your tax filing deadline.

You thought; my employer deducts TDS and there is nothing due. So why file returns?

Your employer deducts your taxes based on your income as per your salary certificate and the investments/rent receipts provided by you. However, there are certain deductions like Section 80G for specified donations that are not entertained by your employer. You need to claim those deductions directly from the Income Tax Department and claim an equivalent refund. Therefore, your employer deduction of TDS is only the basis for the Form 16 that is issued by you. Based on the Form 16, you need to file your returns online with the Income Tax Department before the last date. An important point to remember is that there is no connection between your TDS and tax filing. The tax filing is your duty as a tax assessed. If you have already paid TDS on your income, you still need to file your returns; either to claim a refund or for your own records and the statutory requirements specified by the government of India.

My taxes are paid, so how does it matter even if I don’t file my returns?

That is logically correct but filing returns has a different purpose altogether. As stated, even if all your taxes are already paid, you still need to file returns with the IT department. With the advent of online filing of returns, the entire process has become a lot simpler. Remember, if you forgot to file returns but have no tax dues outstanding you can file the returns before the end of that assessment year in question. For example, your tax returns for the financial year 2017-18 had to be filed before July 31st 2018. If you have no tax dues and have forgotten to file returns then you can file “Delayed Returns” before March 31st 2019. However, once the return is processed and approved, there is no change that you can make. Also in case of refund and carry forward of capital losses, such requests will not be entertained if the returns are not filed by the deadline. The good news is that since there are no tax dues from your side, no penalty or interest will be levied on you. However, you still lose out on the interest on delayed refunds and also on the loss carry forward facility. The Income Tax Department can technically withhold your refunds but normally they don’t do that.

Your Company has deducted extra TDS and you need to claim refund

It often happens that your company has deducted additional tax for a variety of reasons. You probably did not submit the investment and insurance premium proofs on time. Certain deductions may be outside the ambit of your employer. Here is a very important point to remember. If there is any refund that you need to claim, ensure that you file returns before the due date. You can file your returns after the last date and before the end of the Assessment Year. But if you have a refund claim, the IT department can legitimately reject your refund claim if you have failed to file returns before the due date.

You have tax dues and you also missed your tax return filing deadline

This situation can actually put you in a spot. You may have some other sources of income like interest or consultancy fees that you may not have disclosed to your employer. Alternatively, some of your tax exemption claims may have been rejected due to technical reasons. In such cases, there will be tax dues on the tax filing date. In such cases the problem can get compounded if you forget to file your returns before the stipulated date. In case of delay in filing despite having outstanding tax payable, the IT department can impose a penalty of up to Rs.5,000 and also charge interest on the delayed payment. This can add up to quite a bit. Above all, if you have been carrying forward capital losses, you will also lose the benefit of the same and that can substantially add to your tax burden. This is a situation best avoided. Under the new rules, the IT department can also initiate legal and criminal action against you in all such cases.

When you do not file returns within the stipulated date, you not only lose out on interest on refund but end up paying penalties and interest. Additionally, you also lose the benefit of carrying forward and setting off your losses. It is also a negative marking on your tax history and therefore should be best avoided. The tax returns filed and acknowledged are important documents for various purposes ranging from getting loans to getting international visas. You surely don’t want a tainted record to show up in such cases.