Penalty for missing ITR filing deadline has been cut to half

For the financial year 2020-21, the deadline to file income tax return (ITR) is December 31, 2021, (it was extended twice – first from the usual deadline of July 31, 2021, to September 30, 2021, and then to December 31, 2021) due to the pandemic. Till last year, if a taxpayer missed the ITR filing deadline, the maximum penalty he/she would have had to pay was Rs 10, 000.

However, with effect from FY 2020-21, the penalty amount has been reduced by half, i.e., a person filing belated ITR will have to pay a penalty of up to Rs 5,000. Further, if your income is below the taxable limit then you won’t even have to pay the penalty amount if you file your ITR after the deadline subject to certain exceptions. Here is why the penalty this year is half that of last year.

The penalty you will have to pay
In Budget 2021, the government reduced the maximum time allowed to an individual (whose accounts are not required to be audited) for filing ITR by three months. Due to a reduction in the time limit of filing ITR, a consequential amendment was made in Section 234F of the Income-tax Act, 1961 under which the penal amount for filing belated ITR was reduced to a maximum of Rs 5,000 from Rs 10,000 earlier.

Earlier, an individual was allowed time till the end of the financial year, i.e., March 31 to file belated ITR by paying a maximum penalty of up to Rs 10,000.

From this year onwards, the deadline for filing belated ITR is December 31. Accordingly, for FY2020-21 the deadline for filing belated ITR was December 31, 2021, but has been extended twice – first to January 31, 2022, and then to March 31, 2022, due to covid-19. As mentioned above, an individual filing belated ITR by the deadline of March 31, 2022 will now have to pay maximum penalty of Rs 5,000.

Abhishek Soni, CEO, Tax2Win.in, an ITR filing website says, “The last date of filing belated return for FY 2020-21 was December 31, 2021 (originally) which was extended till January 31, 2022 and which is again extended by two months. Now the last date of filing belated ITR is March 31, 2022. This needs to be noted that the deadline for filing the belated return has been extended but late filing fees will be Rs. 5000/- only rather than Rs. 10,000 if you file belated ITR between January 1, 2022 and March 31, 2022.”

Up until last year, there was two-tier penalty structure for missing the ITR filing deadline. If the belated ITR was filed after the expiry of the deadline and on or before December 31, then the individual was required to pay a late filing fee of Rs 5,000. If the ITR was filed between January 1 and March 31, then a late filing fee of Rs 10,000 was levied.

Kapil Rana, Founder & Chairman, HostBook, a fintech startup offering ITR filing services, says, “As per section 234F, till FY 2019-20, if the taxpayer failed to file ITR on or before the due date, then he/she was liable to pay a fee of Rs 5,000 if the tax return was furnished on or before 31st December of the relevant assessment year, otherwise, it will be Rs 10,000 if tax return is furnished after 31st December but from FY 2020-21, the law has been changed. The maximum late filing fees of Rs. 5000 shall be payable if, return is submitted after the expiry of the due date.”

However, there is no change in the penal amount levied on small taxpayers who miss the ITR filing deadline. If you are a small taxpayer whose total income does not exceed Rs 5 lakh during an FY, then the maximum fees you are liable to pay is Rs 1,000 if the ITR is filed any time after the expiry of the deadline (i.e., December 31, 2021) but before March 31, 2022.