Individuals who are looking to file their income tax returns for the previous years can do so only for the two years prior to the current financial year for which he or she has to file returns. If an individual is looking to file his or her tax returns for the financial year 2015-16 then the time frame by which the returns can be filed will be up to the end of the financial year 2017-2018. This means that the individual has a two year period during which the returns must be filed. In this case the returns for the financial year 2015-16 will have to be filed by the 31st of March 2018.
Benefits of Filing Past Years Income Tax Returns
There are a number of benefits that come with filing tax returns for the previous years:
- Loans - Individuals who have filed their returns for past years will find it easier to get their loans approved by banks and financial institutions. The loan process becomes faster and less complicated.
- Proof - Filing past years tax returns also act as a proof of an individual’s income. Tax returns are valid documents that can be submitted whenever there is a requirement to validate an individual’s income.
- Investments - Individuals who have filed their tax returns for past years will also find it easier to make investments or conduct stock or share trading, since financial institutions look favourably on individuals who have their returns in order.
- Refunds - In case an individual has been taxed beyond what his or her taxable liability is for the previous years, that individual can claim for a refund on the excess tax that he or she has paid for the past years.
- Travel - Individuals who have filed their tax returns will also find it easier to obtain visas to travel abroad. Tax returns serve as a proof of financial abidance, which is a mandatory check when it comes to applying for a visa.
Consequences of Not Filing Income Tax Returns for Past Years:
Failure to file income tax returns for previous years could result in certain consequences such as:
- Interest - Individuals who fail to file their income tax returns within the due date for previous years will be liable to pay interest on their outstanding tax amount when filing returns at a later point in time
- Loss - Any losses that an individual may have incurred during the past years, which may be losses through business or capital loss, will not be allowed to be carried forward to successive years.
- Penalty - Individuals who have failed to file their tax returns for previous years before the cut off date are liable to pay a penalty of Rs 5000, which will be levied by the taxation authorities.
- Prosecution - Failure to file tax returns, concealment or nondisclosure of income for past years could also result in prosecution of the individual by the income tax authorities.
- Error - Sometimes individuals who have failed to file their returns in time for previous years, encounter errors in these returns when they actually do decide to file returns.
- Delay in Refund - Filing of past years income tax returns at a later time could result in a delay in the processing of an individual’s tax refund that he or she may be eligible for
Things to Keep in Mind before Filing Past Years Income Tax Returns:
Before filing income tax returns for the previous years it is important to take the following tips into consideration:
- No losses made on the sale of any asset (ie: capital losses) can be carried forward to the following year. However any loss made on the sale of a house or residential property is exempt from this rule.
- Individuals who file their past income tax returns within the duration of one financial year of the relevant financial year, will not be liable to pay any penalty
- Individuals who file their past income tax returns within the duration of two financial years, but after one financial year within the relevant financial year will be liable to pay a penalty of Rs 5,000
- Any income tax returns not paid prior to the due date will attract a 1% penalty interest
- Advance tax not paid in time will result in an interest charge of 1% per month
- Individuals filing their returns for past years are still eligible for any excess tax refund