Missing the deadline of filing income-tax returns can have several consequences, including rejection of loan and visa applications.

In case you have not filed your income tax returns for the last financial year(FY 2014-15 or assessment year 2015-16) by August last year, you can still file it by March 31 this year. Under the income tax law, an assessee can file returns within two years from the end of the relevant financial year. However, in such a case one cannot revise the filing of the returns and is advisable to take the help of a chartered accountant or tax return preparer to file late returns.

In case the assessee owe tax, then one has to pay a penal interest of 1% per month on the amount of income tax due, even if one files the return by March 31 and the penalty will be charged for every month of delay. However, no interest is payable if no tax is due. For most salaried employees, the tax due would be nil or negligible because employers would have deducted the applicable tax by way of TDS.

Missing the deadline of filing the returns also has other consequences. If the assessee has incurred any capital loss, then this cannot be carried forward if the return is not filed within the specified due date. If the return is filed on time, the assessee can carry forward the loss up to the following eight years to be set off against a future income.

Short-term loss may be adjusted either against short-term gains or taxable long-term gains, while long-term loss can be adjusted against taxable long-term gains. The other problem with late filing is that you will get tax refunds late. The earlier you file the return, the faster it is assessed and you receive the refund.

The ITR 1 (known as Sahaj) is filed by individuals having salary/pension income; or individuals having one house property income; or individuals having income from other sources (excluding lottery income and income from race horses). The ITR 2 is filed by any individual who doesn’t satisfy the above conditions mentioned for filing ITR 1 or has exempt income above

Rs 5,000; individuals and Hindu Undivided Family (HUF) having capitals gains, income from two or more house properties, other sources or having brought forward losses; individuals and HUF not having income from business or profession.

In case there is any tax payable and the taxpayer files returns by March 31, the assessee will have to compute the additional interest liability and deposit the amount before filing the returns. If that is not done, the income-tax department can initiate an assessment. An interest at the rate of 1% per month is payable on the balance amount of taxes deposited from the due date of filing of tax returns till the date when the return is actually filed under Section 234A of the Act. Thus, even if you file a belated return, it is advisable to deposit the outstanding tax liability at the earliest so that the interest liability is minimised.

For instance, if a tax payer has to pay advance tax and he did not meet the deadlines of 30% by September, 60% by December and 100% by March 15, then he will have to pay a penalty. If the advance tax amount paid is less than the compulsory 30% of the total liability by the first deadline, September 15, then 1% simple interest per month on the defaulted amount for three months will be charged. The same penalty will also apply if the tax payer missed the second deadline of 15 December and missing the last deadline of 15 March will amount to 1% interest on the entire defaulted amount for every month until the tax is fully paid. If tax returns are not filed within the due date, there could also be a delay in getting refunds, if any, as well. As the income-tax department needs time to process returns, their priority would be for those having been filed before the due date.

Also, if a taxpayer does not file returns on time, he cannot carry forward losses. So, if you have incurred business or capital loss (other than loss from house property) during the year, you will have to forgo the right to carry them to future years if returns are not filed on time. In case of returns filed by the due date, the loss is allowed to be carried forward for eight years for setting off against incomes of future years, subject to certain conditions and this set-off can help reduce tax liability of the taxpayer for the future years. As per the I-T Act, only returns filed by the due date can be revised.

Filing tax returns on time has lot of benefits. If one applies for a loan, he will have to show returns of the last three years, or else the loan application may be rejected. Moreover, if he applies for a visa, many countries require the tax payer to show the most recent ITR and even for buying a life insurance policy with a higher sum assured, one needs to show the latest tax returns.

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Under the income tax law, an assessee can file returns within two years from the end of the relevant financial year

If the return is filed on time, the assessee can carry forward the loss up to the following eight years to be set off against a future income

Short-term loss may be adjusted either against short-term gains or taxable long-term gains, while long-term loss can be adjusted against taxable long-term gains

For most salaried employees, the tax due would be nil or negligible because employers would have deducted the applicable tax by way of TDS

Filing tax returns on time has lot of benefits. If one applies for a loan, he will have to show returns of the last three years, or else the application may be rejected