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.

Income Tax Return: How to reconcile difference in Form-16 and Form 26AS?

One of the common problems faced by the assessee while filing their Income Tax Return, whether, salaried employees or businessmen, is that TDS deducted on their income is not matching with the figures of TDS shown in form 26AS or TDS is not reflecting in form 26AS.

 In the case of salaried employees, their taxes are deducted upfront every month by the employer in the form of Tax Deducted at Source (TDS). Further, the employer is under an obligation to deposit such tax deducted within the prescribed time to the government, file quarterly TDS return for such tax deducted and deposited and issue a certificate to the employee in form 16.

On the basis of such certificate in form 16, the employee can claim credit of taxes excess deposited while filing their respective Income Tax Return in India.

Further, the tax so deposited by an employer is normally reflected on the portal of tax department in the form of form 26AS.

In case of Tax return filing of individual employees, it must be ensured that the figures in form 16 is matching with the figures in form 26AS. Any mismatch in two figures will lead to issuance of notice from tax department.

Therefore, in order to avoid notices from tax department, it is essential to understand the reasons for mismatch in form 16 and form 26AS and how to rectify or reconcile such mismatch before filing ITR.

Reasons for the mismatch between form 16 and form 26AS 

Some of the reasons for mismatch between form 16 and form 26AS are as under:

• Deductor of tax has not deposited the TDS so deducted.
• Deductor has not filed TDS return although TDS has been deposited.
• Clerical mistake in the TDS return like mentioning of wrong PAN of employee, wrong amount, wrong PAN and TAN of deductor, wrong challan identification number of TDS payment, wrong assessment year.
• Wrong TDS amount claimed in the ITR filed.

Reconciling the figures of form 16 and form 26AS 

• In case of mismatch in form 16 and form 26AS, first of all identify the reasons for such mismatch. If the mistake is on part of the employer, inform him about the mistake and ask him to rectify the mistake and file revised TDS return. On the basis of such correction, ITR filing shall be done.
• In case a notice has been issued from the Income Tax Department for TDS credit mismatch, an online reply needs to be submitted after login to the portal. The assessee can choose the option of “Taxpayer is correcting data for Tax Credit Mismatch only” and fill in the relevant details. NRI Taxation in India
  

In order to avoid legal hassles, it is advisable to do periodical checking of form 26AS to see whether TDS deducted by the employer is properly reflecting on the portal. In case it is not so reflected, an employer must be contacted immediately and reasons for such mismatch must be conveyed to employer so that he can make necessary corrections and file a revised TDS return. On the basis of reconciled figures only, an income tax return shall be filed.

Extension of Various Due Dates for Tax Return Filing, Audit and other transactions in India for FY 2020-21

Since the outbreak of COVID-19 pandemic in India, there has been relief granted by Central Board of Direct Taxes (CBDT) in terms of relaxation of compliance, reduction in tax rates as well as extension of various due dates relating to Income Tax Return filing in India as well as uploading of various audit reports on the tax department portal. 

In continuation of same, CBDT has extended various compliance dates for FY 2020-21 as well. Same has been mentioned as under:

1)      Due date for issuance of Form 16 by Companies has been extended from 15^th June 2021 to 15^th July 2021.

 2)      Due date for ITR filing in case of individual and HUF taxpayers have been extended from 31^st July to 30^th September 2021 and again to 31^st December 2021.

 3)      Due date for furnishing tax audit report by those assessees on which transfer pricing provisions are not applicable has been extended from 30^th September 2021 to 31^st October 2021 and now again extended up to 31^st January 2022.

 4)      Due date for filing Income Tax Return by companies not having any transfer pricing transaction has been extended from 31^st October 2021 to 30^th November 2021 and now again to 15^th February 2022.

 5)      Due date for filing Transfer Pricing Audit report for FY 2020-21 has been extended from 31^st October 2021 to 30^th November 2021 and now again to 15^th February 2022.

 6)      Due date for tax return filing for assesses subject to audit but on which no transfer pricing provisions are applicable has been extended from October 2021 to December 2021.

 7)      Due date for filing ITR for assessees subject to audit as well as on which transfer pricing provisions are applicable has been extended from 30^th November 2021 to

 8)      Due date for filing belated Income Tax return and revised return for FY 2020-21 has been extended from 31^st December 2021 to 31^st March 2022.

 9)      Due date for ITR filing in case of assessee on whom transfer pricing provisions are applicable has been extended from 31^st December 2021 to 28^th February 2022.

 10)  Due date for completion of penalty proceedings under the Income Tax Act has been extended from 30^th September 2021 to 31^st March 2022.

 11)  Due date for manual filing of form 15CA and 15CB has been extended from 15^th July 2021 to 15^th August 2021. Authorized dealers haven been instructed to accept the manual form 15CA and 15CB till 15^th August 2021.

 12)  Last date for linking of Aadhar with PAN has been extended from 30^th June 2021 to 30^th September 2021 and now to 31^st March 2022.

 13)  Other Extensions in Due Dates are as under:

 a)      Due date for Income TaxFiling in response to notice issued u/s 148 has been extended from 1^st April 2021 to time allowed under the notice or 31^st May 2021whichever is later.

 b)      Due date of filing belated return u/s 139(4) and revised return u/s 139 (5) for FY 2019-20 has been extended from 31^st March 2021 to 31^st May 2021.

 c)      Appeal to first appellate authority ie CIT-A for which the due date of filing under that Section is April 1, 2021 or thereafter, may be filed within the time provided under that Section or by May 31, 2021, whichever is later.

 d)     Due date of submission of Statement in Form No. 61 has been extended from 30^th April 2021 to 31^st May 2021.

 e)      Due date for filing objections to DRP u/s 144C of the Act, for which the due date was 1^st April, 2021 or thereafter, may be filed within the time provided under that Section or by 31^st May, 2021, whichever is later.