Income tax returns should be filed by taxpayers on an annual basis before the deadline. If you fail to file your return before the deadline, it can be done before the end of the assessment year. As a responsible citizen, you should pay your taxes and file your returns as per the due date. If there are omissions or inclusions, they can be revised promptly. On the other hand, there will be no opportunity to revise the returns when submitting after the due date.
The income tax return for the current assessment year (2018-19) should be filed before July 1st, 2018.
One should know that there is a difference between financial year (FY) and assessment year (AY). The financial year 2016-17 is same as the assessment year 2017-18. Similarly, the financial year 2017-18 is same as the assessment year 2018-19.
You can file a return for AY 2017-18 until March 31, 2018. If you file them after March 31st, 2018, it is called a Belated Return. Even if you file the return after the due date, you should follow the same procedure as you would while submitting the returns before the due date. For instance, you use the same form to file your returns in either case.
The ITR that is applicable as per your source of income and profession should be selected to file the returns. The returns can be filed online or offline, as per your convenience.
Consequences of Belated Returns
As far as possible, you should submit the returns before the deadline. However, you might fail to submit returns if you are hospitalized or do not have access to an auditor.
If you have multiple sources of income, it is very important to consult an income tax expert so that you can file returns properly. Consulting one can also help you derive maximum benefits under the various tax exemption columns.
If you fail to file your returns before the deadline, you should make sure that the applicable taxes are paid before the deadline. If there are unpaid taxes, the income tax department will impose a penalty of 1% on a monthly basis. The penalty will be calculated until the date of payment.
The assessing officer has discretionary powers to charge a penalty of Rs. 5000/- for non-filing of income tax return after the due date, but before December 31, 2018, of the assessment year. If the returns are filed after December 31, 2018, the taxpayer will have to pay Rs. 10,000 as a penalty.
However, the penalty will be limited to Rs. 1000/- if the income of the individual is less than Rs. 5 lakhs.
Detriments of late filing
If there are any losses due to house property, they can be carried forward to subsequent years. However, you will be unable to carry forward other losses, if you fail to submit the returns before the deadline.
Hence, taxpayers should pay taxes and file returns before the deadline.
No Options to Revise Returns - If the return is not filed before the due date, it is not possible to revise the return unless a query is raised by the income tax department while processing the return.
Set off a Capital loss – If the return is not submitted before the deadline, it is not possible to carry forward the losses incurred under capital gains. If you had incurred losses due to ‘day trading’ through the purchase and sale of equities, the losses can be carried forward up to 8 assessment years.
Capital gains are calculated on an annual basis. The value of sale receipts should be greater than the cost of acquisition so that you will not incur a loss. If the value of sale receipts is higher than the cost of acquisition, it will lead to capital gains.
Capital gains will be assessed as per the type of asset. There are long-term and short-term capital gains. If you incur a loss of one type of capital asset, it is not possible to set off against another type of capital asset. Hence, the capital loss should be balanced against the capital gains head only.
If you incur a long-term capital loss, it can be set off against the long-term capital gain. If you incur a short-term capital loss, it can be set off against both the long-term capital gains and the short-term capital gains.
Long-term capital gains are taxed at 20%. The LTCG will be calculated at 20% without indexation and at 10% with indexation. There are various kinds of capital assets which include stocks, mutual funds, land, house, jewelry, and buildings. If there is an increase in the value of the asset during the sale, it is considered a capital gain. If there is a decrease in value, you will suffer a capital loss. If you have held the asset for more than 36 months, it is considered as a long-term capital asset. The gains on selling the capital asset will be termed as long-term capital gain. In case of a mutual fund, the period is calculated for 12 months.
The LTCG on stocks and equity mutual funds is fixed at 10% if the total gain in a financial year is above Rs. 1 lakh.
While calculating LTCG, inflation will also be considered. However, for investments made in equities and mutual funds, the indexation facility is not provided. The indexation facility is available for LTCG on the sale of land, house, and buildings. Under Section 54 of the income tax act, there is tax exemption on the profit earned through the sale of a house.
‘Short Term Capital Gains’ is made by selling a capital asset in less than 36 months. If you have made a profit, it is termed as a short-term capital gain. If there is a loss, it is termed as a short-term capital loss.
Calculation of tax on capital gains
A different kind of approach is followed when calculating tax on capital gains. If you make any gains through the STCG, the gains will be added to your income and you will pay tax as per the tax bracket. The STCG on stocks and mutual funds is fixed at 15%.
Cost Inflation Index (CII)
The CII will be fixed and decided by the government. You should use the CII for the calculation of LTCG (other than the sale of equity stocks or mutual funds).
The capital gains calculation can be done very easily by using any of the online calculators provided by reputed websites that deal in financial products. If you invest in mutual funds, you will be able to gauge the capital gains on mutual funds, from your online account. The calculations will be done automatically and you can track the information on an annual basis. The mutual fund management company will provide you the LTCG and STCG made on the sale of funds in the respective financial years.
If you use the online calculator, you can find the details directly. You should enter the sale price, purchase price, date of purchase, date of sale and investment details to get accurate information.
The calculator will provide you the information about the type of investment, type of gain (STCG or LTCG), CII of year of sale, CII of year of purchase, difference between purchase price and sale price, time between the sale and purchase, purchased index cost, LTCG without indexation and LTCG with indexation.
A taxpayer should file their income tax return before the deadline. It is very important to understand various procedures and exemptions available under the income tax act. By filing the returns before the deadline, you will be able to carry forward certain losses for the next eight financial years and therefore minimize them.