Benefits of filing ITR on time and what happens when you miss the deadline

The deadline for filing Income Tax Return (ITR) for the Financial Year 2021-22 (FY22) is July 31, 2022. Taxpayers need to submit the ITR in time in order to avoid the late fees for filing a belated ITR. The tax department has been reminding taxpayers through emails and SMSs about the ITR deadline. The Finance Ministry has clarified that there would be no extension of the last day of filing of ITR this year.

It is important to file ITR if net income exceeds the basic exemption limits before subtracting these qualified assets and exempting any eligible capital gains. All deductions and exemptions from long-term capital gains taxes must be claimed on the ITR.

Uses of filing ITR

Life insurance cover: You may be asked for your tax return by the insurer when buying a life insurance cover. Having one may make you eligible for a better cover. However, you may not get the right cover if the insurance provider believes that you are a tax evader.

Faster loans processing

Banks demand copies of ITR to disburse loans and losses; they also ask for salary slips showing all deductions, TDS certificates, and copies of income returns for the last two years. Typically, a potential borrower is asked for three years of ITR documentation. These documents make it easier fort banks to verify the financial status of the borrower and also their repayment capacity. The processing period could be shortened by submitting ITR documents.

Visa application

Some consulates demand ITR for the last two years from applicants seeking visas for travel. Travellers to US, Europe, Canada, and European countries are required to furnish ITR to prove that they have a legitimate source of income in India and do not plan to leave the country for good. It is important to submit your most recent tax return when applying for a visa.

ITR refund

The assessee would not be eligible for an ITR refund if the return is not filed. Filing ITR is important even for those earning less than Rs 2.5 lakh per year if they pay the tax deducted at source (TDS) in income earned. Any dues from the Income Tax department are foregone if ITR is not filed.

Penalty for filing after the deadline

Taxpayers need to ensure that they file their ITRs by the Sunday deadline as the government has already clarified that there would be no extension of the deadline. Filing ITR after the deadline counts as filing belated ITR. The taxpayer would be levied a late fine for filing a belated ITR. As per section 234F of the Income Tax Act, 1961, this fine is Rs 5,000. For small taxpayers who have a total income not exceeding Rs 5 lakh the late fee will not exceed Rs 1,000. The late fee needs to be deposited along before the belated ITR is filed.