Today, July 31, is the last day to file your Income Tax Returns (ITRs) for the fiscal year 2023-24. Failure to reach this deadline may have catastrophic consequences.

Ritika Nayyar, Partner at Singhania & Co., explains the outcome:

Late Filing Fee: If you miss the deadline, you can still file the ITR by December 31st, but you will have to pay a penalty of Rs5,000/-. There is respite for small taxpayers whose total income does not exceed Rs 5,00,000/-; for them, the penalty is limited to Rs 1,000. In summary, you will be assessed a Rs5,000 penalty (reduced to Rs. 1,000 for individuals with taxable income less than Rs 5 lakh).

Interest will be levied on the unpaid tax amount at a rate of 1% per month or portion thereof from the due date (August 1st) until the date of payment.  For example, if you file your ITR on November 30th, the interest computation on tax will begin on August 1st and continue until November 30th on the amount of tax owed up to the date of filing the ITR. Taxpayers may forfeit some of the benefits of filing their returns on time. This includes the option to carry over losses for future set-off against income, which can be especially devastating for enterprises or people who have incurred capital losses.

"In the event of recurrent noncompliance, harsh fines may be applied, and prosecution may be commenced. For example, if a salaried taxpayer with a total income of Rs 10 lakh fails to file his return by the due date and owes an additional sum of Rs 50000 in taxes, he would be charged a late filing fee as well as additional interest on the unpaid taxes, increasing his financial burden. As a result, it is recommended that taxpayers submit their income tax returns on time in order to prevent these penalties and any hardship they may experience," said Vishal Gehrana, Principal Associate, Karanjawala & Co. and Advocate on Record, Supreme Court.

Loss of Carry Forward Benefits: If you have experienced losses (from investments, company, etc.), you cannot carry these losses forward to offset future income unless you file your return before the deadline.

Loan Rejection: Many financial organizations accept your ITR as evidence of income. Not submitting it might reduce your chances of securing a loan.

Severe Penalties: In the event of major tax evasion, the Income Tax Department may commence legal processes, including imprisonment and heavy penalties.

Difficulty Claiming Refunds: If you overpaid taxes, you will not receive a refund unless you file a return. Notice from the Tax Department: Delays in filing might result in notices from the tax department, generating unnecessary worry and difficulty.