NRI Tax Return Filing - Why ITR should be filed before due date?

In India, every individual including Non Resident Indians and non-audit assessee are required to prepare and file their annual Income Tax return on or before due date i.e 31^st July for income earned during previous financial year. However, for FY 2020-21, owing to COVID pandemic due date for Income Tax return filing has been extended to 31^st December 2021.

It is very important for both NRI as well as Indian Residents to complete ITR filing on or before due date otherwise unnecessary fines and penalties are levied which may be avoided.

In this write up, we will understand the consequences of late filing of NRI Tax Return under the Income Tax Act, 1961(“the Act”).

1)      Losses cannot be carried forward 

In case of late filing of NRI Tax Return, losses like business loss and capital loss cannot be carried forward to next year for set off against future year profits. Therefore, this is a serious consequence of not filing ITR within due date as losses will be lapsed.

2)      Interest u/s 234 A

Late filing of NRI tax return will lead to interest @ 1% u/s 234A of the Act from due date of Tax Return filing till date of actual tax return filing.

3)      Penalty u/s 234F

Delay in NRI Tax Return filing will also attract penalty of Rs 1000 to Rs 10,000. Further, non filing of income Tax return may also lead to prosecution in some cases.

4)      Delay in getting refund

Any delay in Tax filing in India will result in late processing of ITR by tax department due to which refunds are also credited late in the assesses bank account. Accordingly, it is advisable to file Income Tax return well in advance before due date so that refunds are credited in the bank account within time.

5)      No Sufficient time for filing tax return

As per amendment in tax laws, now Income Tax return cannot be filed after end of relevant assessment even after paying late fees. Previously, the assessee used to file tax return late after paying late fees but now this option is not available. Therefore, in case the assessee missed the due date, He would have very less time for filing ITR.

6)      Reminders and Notices from tax authorities

Late filing of Income Tax Return would lead to reminder notices from tax authorities. Further, due to Annual Information Report, nowadays tax authorities are aware of all the major income earned and expenses incurred by the assessee. Suppose assessee has earned any income and not filed its tax return, it will result in issuance of Income tax notice by compliance cell as well as commencement of Income Tax Faceless Assessment against the assessee.

7)      Prosecution

Intentional non filing of ITR may also lead to prosecution in some cases by the tax authorities.

8)      Black Money Act

As per Income tax Act as well as Black Money Law, any Resident having foreign income or foreign assests need to disclose the same in his ITR. Failure to do so will lead to harsh penalties as well as prosecution.

Thus, it may be inferred from above, that firstly, it is very important to file Income Tax Return and also such tax return shall be filed on or before due dates in order to avoid interest, penalty, prosecution and loss of refund and carry forward of losses.