Until AY 2017-18, taxpayers could file their returns with very few problems, especially without being subject to a penalty for filing their returns prior to the completion of the assessment year. In case a taxpayer did not file his/her returns before the completion of the assessment year, he/she would be levied with a fine under Section 271F of the Income Tax Act. The Assessing Officer would impose this penalty on the assessee if the assessee did not have a proper reason for the delay. Such a penalty would be levied on an assessee very rarely and it was discretionary.
The Finance Act, 2017, (see Section 234F) charged a Rs.5,000 fee if an assessee filed his/her tax returns after the completion of the due date specified under Section 139(1) of the Income Tax Act, but prior to December 31 of the relevant AY. The fine for the filing of returns after December 31 was Rs.10,000. Although there was a cap on the fees to be restricted to just Rs.1,000, this restriction would only be applicable to those whose overall income was less than Rs.5 lakh.
After this new provision was introduced, assessees who filed their tax returns after the due date are now compulsorily required to make a payment towards late filing fees under Section 234F of the Income Tax Act. In addition, interest will also be applicable under Section 234A, Section 234B, and Section 234C of the Income Tax Act. The new Income Tax Return forms have seen the incorporation of relevant changes in them, and a new row is now present so that the assessee can enter details regarding the late filing fees.
This new provision in Section 234F of the Income Tax Act has been added so that taxpayers file their returns within the prescribed due dates mentioned in Section 139(1) of the Income Tax Act. The fees charged under Section 234F of the Income Tax Act, however, shall be charged to taxpayers who have submitted their returns prior to the due date mentioned in Section 139(1) regardless of the reason why the delay was caused, and regardless of whether or not tax payments were done via Advance Tax or Tax Deducted at Source.
In order to ensure that taxpayers do not rush towards the due date and to avoid technical and server issues of the Income Tax Department, income tax returns must be filed as early as possible.