Failing to file your ITR can lead to a range of penalties and complications, both financial and legal. Below are the specific consequences of non-compliance:
Penalty charges
Under Section 234F of the Income Tax Act, a penalty of up to Rs. 10,000 may be imposed for late filing of ITR. For individuals with an annual income of up to Rs. 5 lakh, the penalty is reduced to Rs. 1,000. However, no penalty is levied for individuals whose income falls below the basic exemption limit.
No carry forward of losses
If you fail to file your ITR within the stipulated deadline, you lose the ability to carry forward certain losses, such as those from capital gains or business operations. This means you cannot offset these losses against future income, which could lead to higher tax liabilities in subsequent years.
Interest on the tax amount
As per Section 234A of the Income Tax Act, a monthly interest of 1% is levied on the unpaid tax amount from the due date until the payment is made. For instance, if you owe Rs. 1,50,000 in taxes and delay payment by three months, you will incur an additional Rs. 4,500 in interest.
Prosecution for failing to file your income tax return
In cases of willful non-compliance, the Income Tax Department can initiate prosecution under Section 276CC. If your tax liability exceeds Rs. 25,000, you could face imprisonment ranging from six months to seven years, along with a fine. For lower tax liabilities, imprisonment may range from three months to two years.
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