Importance of 31st December in relation to Income Tax filings

In this blog, we'll explore the importance of 31st December in the context of Income Tax filings and why it deserves attention amidst the joyous New Year celebrations.

If we missed filing Tax return for a Financial Year by 31st July of immediately succeeding Financial Year (Example- for recent FY 2023-24, the deadline for Tax filing was 31st July 2024) or we need to fix errors in Tax return filed already for recent Financial Year, the date of 31st December is the final opportunity to set things right, by filing a Tax Return (if return was not filed) or by filing a revised tax return (for correcting errors in return already filed for last Financial Year).

Filing return by 31st December - Belated Return

Usually, a taxpayer is required to file his Tax-Return on or before 31st July, from the end of the Financial Year. In case where a taxpayer encounters challenges and cannot file Tax-Return for a Financial Year, on or before the deadline of 31st July, he has an opportunity to file his return even after 31st July.

The Return filed after the Deadline of 31st July is called as “Belated Return”. However, such Belated Return must be filed within 9 months after the end of the Financial Year.

For example:

For the Financial Year 2023-24 the last date by which a Belated return can be filed is 31st December 2024.

Filing a Belated return comes with certain consequences:

Filing Belated Return even though offers Taxpayers an opportunity to file ITR after missing the original deadline of 31st July, but failing to File ITR by the Deadline of 31st July can lead to the following consequences:

• The Taxpayer will be required to also pay Interest along with Tax amount, for delayed period of Tax filing.
• The Taxpayer will also be required to pay Late fee, depending upon his Income for the Financial Year, as follows:

• In case the Taxpayer failed to file return by Deadline of 31st July and he has incurred any loss from Business or Freelancing activity during the Financial Year, such losses won’t be allowed to be adjusted in future Financial Years against possible profits in such future years, for Belated return filing.

Advantages of Filing a Tax Return:

The Taxpayer should file his Tax return within the deadline of 31st July, if he misses the deadline he should file a Belated Return by 31st December, since it is better to file Belated Return than not filing your tax-returns at all. In today’s world, Tax Return is an important document and third parties like Banks etc. rely on Tax return for their decision making about financial standing of Taxpayer. Let’s have a look at some of the important advantages of filing Tax return, be it within the deadline of 31st July or after the deadline but on or before 31st December.

1)   For claiming refund of excess TDS / TCS:

Filing a Tax Return offers taxpayers the chance to apply for a refund of Tax Deducted at Source (TDS) or Tax Collected at Source (TCS). It is crucial for Taxpayer to ensure precise reporting of income and related details in his tax-return for claiming refund of excess TDS/TCS that might have been deducted/collected.

2)   For availment of loan:

When applying for a loan from a bank or financial institution, the Income-Tax Return (ITR) is an essential requirement. It serves as a key document to demonstrate your income and financial standing and thus, helps to avail loan. Filing a tax-return can facilitate the loan approval process by ensuring a smoother sanctioning of the loans.

3)   Avoiding penalties and legal consequences:

The Tax Department is keenly keeping a check over non-filers through various sources and taking actions against such non-filers which includes imposition of penalties, higher rates of TDS/TCS, etc. Therefore, one should always try to comply with the provisions of Income Tax Return and file the Tax Return.

4)   Carry-forward of certain losses:

Filing a Tax Return allows the Taxpayer to carry forward losses incurred in the Financial Year against possible profits of future Financial Year. However, in case of Belated Return only certain losses can be carried forward such as House property losses, Losses from unabsorbed depreciation.

Revised Return – A tool to correct mistakes in Tax Return already filed.

A Revised Income Tax Return is an important provision that allows individuals freedom to correct errors or provide additional information (which was missed to be provided in Original/Belated ITR filed), in their previously filed tax return. As the name itself suggests, the revised return can be filed, where you have already filed a Tax return and you wish to make certain changes in Tax return already filed.

A Revised Return can be filed, latest by 9 months from the end of the financial year.

For example:

For the Original return filed for Financial Year 2023-24 (i.e. Assessment year 2024-25), the last date by which, revised return can be filed is 31st December 2024.

Reasons to File a Revised Return

1)   Correction of Errors:

Individuals may file a revised return to correct mistakes, update information, or include details unintentionally omitted in the original filing.

For example: Correction of Incorrect personal or bank information by filing Revised Tax return, reporting of missing information by filing Revised Tax Return (Example- Income from sale of Shares not reported in Original Tax Return), adding missing information by filing Revised Tax Return (Example- Interest Income missed out in Original Tax Return)

2)   Missed Deductions or Exemptions:

If a Taxpayer realizes that He/ She missed claiming certain deductions or exemptions in Original Return filed, a revised return provides an opportunity to claim those deductions in Revised Return.

For Example:  Deductions under Chapter VI-A (LIC, Tuition fees, medical insurance, Provident fund) not claimed or Short claimed in Original Return filed.

Who is mandatorily required to File Tax Return: -The Tax Department does not mandate every citizen to file Tax return. Those who earn Income above certain minimum threshold limit during the Financial Year or those who fall under certain categories are only required to mandatorily File Tax Return. Click here to check if you are required to file Tax Return.

Beyond 31st December: The Role of Updated Return (ITR-U)

If a taxpayer fails to submit a Revised or Belated return by 31st December, they still have the opportunity to rectify or file their ITR using an Updated Return, commonly known as ITR-U. The ITR-U allows Taxpayers to make necessary corrections or provide any missing information in their ITR filing after 31st December. It also allows the taxpayers who have not filed return till 31st December to file the ITR after 31st December.

To know more about Updated Return click here

Conclusion

In conclusion, December 31st plays a crucial role for Income Tax Compliance. It marks the deadline for belated and revised returns, offering a chance to rectify errors or claim missed deductions. Filing belated returns may require payment of late fees but it allows a taxpayer to claim refund of excess TDS/TCS, if any and it prevents penalties and legal consequences for not filing ITR. Revised return helps correcting mistakes or declare overlooked details in your Tax return. For those missing deadline of 31st December, an updated return (ITR-U) remains an option, though it comes with additional tax impact.