What will happen if I do not file my Income Tax Return (ITR)?

Have this thought ever struck your instincts – What will happen if I do not file an income tax return ??

If yes, you must have dropped this thought!! And either, kept filing your income tax return anyways or, you might have made excuses for not filing your return

However, not filing your return can have various consequences. In this blog, we try to make you acquainted with the effect of not filing your income tax return.

The discussion can be subcategorized into two parts:-

• Individuals having an annual income not exceeding Rs.2.5 lakhs are not required to file an ITR except in certain cases. Therefore, if your total income is below Rs.2.5 lakhs and the exceptions do not apply to you, you won’t have to face any consequences of non-filing.
• If you were required to file ITR or if not required (as above), the tax department still asks you to file u/s 142(1). But you fail to do so. Then many repercussions, as described below, may follow :

Penalty and Interest may be attracted

Interest @1% u/s 234A shall be recovered from you if you have any unpaid tax liability for the respective year and are filing a belated return.

Penalty amounting to Rs.5000/- u/s 271F may be imposed by the tax department if you fail to file your ITR timely.

Given below are the penalty provisions -

• If your total income is less than or upto Rs.5 lakh, then the maximum penalty levied on you will be Rs.1,000.
• Similarly, a penalty of Rs. 5000/- will be charged on income above Rs.5 lakhs if you were required to file an ITR, but fail to do so. by the due date, i.e., 31st July or 30th Sep. This penalty will be applicable only if you file till 31st Dec.

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Example: Your income exceeds Rs. 2.5 lakhs for AY 2023-24. Hence, you were required to file an ITR by 31st July 2024. But you file your ITR on 31st Oct 2024 In both cases, as per the latest tax rules, the following penalties may be levied

Solution: You file your ITR on 31st Oct 2024 Then the penalty amount shall be Rs. 5000/- if your income exceeds Rs. 5 lakhs or Rs. 1000/- if your income is below Rs. 5 lakhs.

• Notice – Sec 142(1)
  If you do not file your ITR, then the Income Tax Department can ask you to furnish it through a notice under section 142(1).
• Best Judgement Assessment – Sec 144
  In case you fail to file your return of income, the department can presume your income and proceed with the computation of your tax liability in the manner as deemed fit by the department. But, a notice for the same will be served upon you. So that you can explain the unavoidable reasons for the delay on your part.
• No loan, No credit card, etc
  The other problems that you might face for not filing your income tax return may out-rise from situations where your filed ITR becomes a documentary need for the process.
• No refund, No carry forward of losses
  You can claim refunds and the benefit of carrying forward only if you file your income tax return.

We do sometimes presume that if taxes are already paid, nothing might happen. But it is not always the case. Some of the above consequences might be followed even in situations when you have already paid taxes in full. Paying tax never relieves us from our duties of filing income tax returns by the due date. Also, as per Income Tax law, if you are required to file your return you must file it as ignorance of law is no excuse in our constitution!!

Avoid paying non-filing penalties with our tax experts. Book an eCA to get CA-assisted ITR filing services.