With the goal of ensuring timely compliance and submission of returns, the government enacted Section 234F, which became effective in fiscal year 2017-18. Late fines are assessed when returns are not filed on time. The deadline for filing returns in unaudited instances is July, and the deadline for audited cases is October. If a taxpayer fails to file his return by the due date, he must incur required late fines. Failure to file an ITR within the stipulated time may result in a penalty or late filing charges, apart from the inconvenience of the delay. Section 234F covers everything about late filing charges and the conditions under which they apply. In this article, we have covered every aspect related to the applicability of Section 234F under the Income Tax Act, 1961. Read carefully to avoid being a victim of the Late Fees Under Section 234F.
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What is Section 234F of Income Tax Act, 1961?
According to Section 234F of the Income Tax Act, 1961 if a person or a company is required to file an Income Tax Return under the provisions of the Income Tax Act but fails to file it within the prescribed period, then a late filing fee is required to be imposed by him while filing the ITR form. The amount of the fine depends on the delay and the total income. Section 234F of the Income Tax Act was introduced in the 2017 Budget by the then Finance Minister of India, Arun Jaitley. Below is the amount of the penalty under Section 234F, its applicability, and more.
When is a person mandatorily required to file Income Tax Return?
If you meet the conditions below, you must file a tax return:
- If your total income exceeds the basic Exemption Limit: If the individual’s income exceeds the maximum exemption level, i.e., $2.5 million in the case of an individual below 60 years, $ 3 million in the case of a resident senior (aged 60 years or above), and $ 5 million in the case of a resident super senior (aged 80 years and above), the individual must file a return. If you opt for the new tax regime, you are not entitled to the various exemptions available under the old tax regime.
Under the old tax regime, the minimum exemption limit was not calculated after deducting capital gains exemption under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA, or 54GB and deductions under sections 80C to 80U.
- If you have assets outside India:
It is necessary for an individual to file a tax return if he or she:- Has (as beneficiary or otherwise) any assets (including any financial interest in any company) situated outside India.
- Has signature authority in any account located outside India.
- Is the beneficiary of any asset situated outside India (including any financial interest in any organisation)
- If you deposit more than Rs. 1 crore in a Bank Account: If a person has deposited 1 million rupees or more in one or more current bank accounts during the previous year, he has to file a return. There was no mention of a deposit to a post office current account. So, if a person deposits more than 1 million rupees in a post office current account and his income is less than the basic exemption limit, he may not be required to file a return.
- If you spend Rs 2 lakh on International Travel: If an individual has spent more than Rs 2, 00,000 on travel to a foreign country for himself or anyone else in the previous year, he has to file a return.
- If your annual electricity bill is Rs. 1 lakh: If a person has spent more than 1,000,000 rupees on energy consumption in the previous year, he has to file a return.
- If the gross income from the profession exceeds Rs. 10 lakhs: If a person’s total gross income from his profession exceeded 10 million rupees in the previous year, he has to file.
Who is mandatorily required to file an Income Tax Return?
The following persons are compulsorily required to file their income tax returns with the Income Tax Department of India:
- Any person whose total income exceeds the income tax rate
- Company
- Firm According to the Income Tax Act, “firm” means a Partnership Firm. Firms with a single owner are considered natural persons.
- A person is required to file a tax return if their total income from another person (for whom it is assessable under this Act) in the previous year exceeded the threshold that is not subject to income tax.
Penalty under Section 234F of the Income Tax Act, 1961
The modification will be enforced from 1 April 2017 under section 234 F of the Income Tax Act; if you produce the ITR beyond the required date, you will be liable for the maximum penalty of Rs 10000. There will be no penalty if you file your Income Tax Return for Fiscal Year 2021-22 after July 31st (7th Nov and 30th Nov for audit and transfer pricing cases). If the ITR is submitted after December 31, 2022, the punishment would be increased to Rs 10,000. However, the Income Tax Department has stipulated that if the total income is less than Rs 5 lakh, the highest amount payable will be merely Rs 1000.
Penalties under Section 234F of the Income Tax Act will be assessed on top of existing interest under Section 234A for the late filing of an ITR. The amount of late fees, i.e., the penalty under Section 234F of the Income Tax Act, depends on the time of filing the ITR and the total income. If the person required submitting the Income Tax Return does not do so on time, he will be required to pay the penalty as follows:
- Amount of the fine under Section 234F, If ITR filing is done after August 31 but before December 31 of the year under assessment, a penalty of 5000 will be imposed.
- A penalty of 10,000 will be charged if the Income Tax Return is filed after December 31st (1st January–31st March).
- However, if your total income after deduction is less than or equal to 5, 00,000, the penalty will not exceed 1,000.
You will not be charged a penalty if your total gross income, or income before deductions, is below the tax threshold, which is:
- 2,50,000 for a normal citizen (age up to 60 years)
- 3,00,000 for senior citizens (aged 60 and above)
- 5, 00,000 for super seniors (aged 80 and above).
Also, if you do not file your Income Tax Return on or before the due date, you must pay interest at the rate of 1% per month on the amount of tax that remains unpaid, as required by Section 234A. If taxes have not been paid, the ITR will not be completed. The computation for fines will begin on July 31, of the relevant assessment year. Furthermore, if you have any company losses or capital gains throughout the year, you must make certain that you file the return before the deadline. If you do not do so, you will be disappointed in your ability to carry forward the same losses to future years in terms of income.
Conclusion
When it comes to completing our Income Tax Return (ITR), we take great care not to make any errors. However, it is possible that taxpayers will make a mistake when completing our ITR at the last minute. These might include mentioning the incorrect bank account number, failing to disclose interest income, claiming the incorrect deduction, and so on. However, the question is whether a person may file his or her ITR again if it was previously filed with errors or omissions.
Section 234F of the Income Tax Act applies to all taxpayers, including individuals, HUFs, companies, firms, AOPs, etc. All of the above will be liable to pay ITR late filing charges under the provisions of Section 234F if they fail to file their ITRs before their respective due dates.
