Why you should file your Income Tax Returns on time?

With the income tax department allowing ample time for filing returns, many taxpayers take it easy. For the income earned in the past financial year (FY16), a taxpayer can file returns up to March 2018. However, sticking to the first deadline of July 31 2016 has its benefits.

Say, you make a mistake while filing returns — it can be a wrong computation or incorrect bank account details. If you file returns on time, the income tax (I-T) department will allow you to revise it as many times as you wish until the end of the assessment year. In case of belated filing, the taxpayer loses this advantage.

Missing the first deadline also means that the taxpayer cannot carry forward certain losses. The Income Tax Act allows individuals to carry forward losses under the ‘capital gains’ head and also business losses for professionals and businesspersons. These can be adjusted against the future gains for up to eight years. Due to the correction in stock market in the last financial year, many investors would have suffered a loss in their equity trade. Filing returns on time can help them utilise these losses in the coming years.

The only loss that’s allowed to be carry forward for latecomers is the loss from house property.

For those filing belated returns, they will also need to shell out a penalty. There will be a one per cent penalty every month under Section 234A on the liability if the return is not filed on time.

Those who file returns on time get faster refunds and their filing is processed quickly, too. Last year, many taxpayers who filed before the deadline got refunds within a fortnight. However, in case of belated filing, the processing and returns are both delayed – it can easily take six to eight months.

In the recent Union Budget, the period of filing returns has been reduced from two years to one year. Taxpayers will need to file returns before the end of the relevant assessment year. This will apply from the next assessment year. Tax experts, therefore, say one should start filing returns on time to avoid hassles later.