To offer some relief for individuals who have not filed ITR returns In India, the last date for income tax filing for FY 202-21 (The assessment Year 2021-22) has been extended till 31st Dec 2021. Generally, the due date of ITR filing is July 31 for non-audit-business individuals and 31 October for audited-business assessees. Like resident Indians, it is important for people with NRI status as well as OCI and PIO cardholders to file their income tax in India. Non-filing of ITR may result in several penalties and lots of inconveniences. Some of the serious consequences of not filing ITR in India for NRIs/ PIOs/ OCIs are described here.
Consequences of not filing ITR in India for NRIs
If you missed the due date, here are some consequences of not filing an income tax return that NRIs may face:
- Levy of interest penalty: The foremost impact of not filing ITR is a penal interest of 1% is charged (u/s 234A of the Income Tax Act, 1961) for default in payment of tax by the due date. The penal interest is charged in addition to the normal interest on tax liability payable. Hence, you will be liable to pay double interest, i.e. a normal interest u/s 234B and penalty interest, for not filing an ITR by the due date. Till the date you receive a notice from the IT Department, a big amount of interest would get accrued, which adds to the burden for you.
Also Read: 5 Ways to save on the tax NRIs have to pay
- Penalty fees: If ITR is not filed by the due date, a late penalty fee between Rs. 1,000 to Rs. 10,000 is levied under section 234F of the Act. There are also provisions for prosecution in case of non-filing of income tax returns.
- Late ITR means late refund: You must remember that if ITR is filed after the due date, the ITR will also get processed with delay, which will result in late processing of ITR for refund. As a result, you will face a delay in receiving the refund back from the Income Tax Department. For individuals who file their ITR 1-2 months before the due date, their ITRs are processed first and for individuals who file ITR in the last couple of days, refund processing shall also take place accordingly on a FIFO basis. Hence, filing ITR much before the due date is important.
- Instant filing of Income Tax Return: As per the latest provisions of the Act, you can’t file ITR after the end of the respective assessment year, even with a late fee. It means if you miss the due date, there will be less time left to file the ITR. And if the ITR is not filed by the end of the assessment year, it will cause a lot of inconvenience and follow-ups in the form of notices from the IT Department, loss of refund, etc.
- Income tax and scrutiny notices: IT Department gets to know major financial transactions such as property transactions, remittances, bank deposits, credit card transactions, etc. through various sources. Income earned by an assessee is brought to the notice of the Income Tax Depart through TDS records. In situations like these, if an individual doesn’t file the ITR by the due date, he/she may be served some income tax notices from IT Department through IT Department Compliance Cell and even Income Tax Scrutiny Notice in some cases.
- Follow-ups from IT Deptt: Once the Income Tax Department comes to know about the non-filing of ITR by the due date, the assessee will start receiving reminders via emails, SMS, post, etc. Your information will be recorded in the list of defaulter/ non-compliant assessees.
- Losses can’t be carried forward: If the assessee has incurred some losses during the year, such as loss on sale of shares/ mutual funds, etc., the losses can be carried forward to the next year to set off against profits in the coming years. But if you fail to file the ITR by the due date, you lose the right of carrying forward losses.
- Prosecution: As per the new provisions of Income Tax Law, willful default on ITR filing by the due date can lead to the initiation of prosecution provision by the Income Tax Authorities.
- Foreign assets: As per the newly passed law in both houses of parliament, all resident assesses who have foreign assets or financial interest are mandatorily required to file their ITR whether they have taxable income or not.
- Black Money Act: As per the newly passed Black Money Bill (regarding foreign undisclosed assets and income), it is very important for resident assessees, who have foreign sources of income and/ or assets, to file an ITR. Non-ITR filing or non-disclosure of income may attract the harshest penal provisions of the Act.
- Importance of tax return in the documentation: ITR is a very important document for documentation with various authorities, such as for the purpose of the application, loan application, etc. Filing ITR on time strengthens the assessee’s representations. Non-filing of ITR before or by the due date leads to non-repairable losses to an assessee.
Whether a resident or NRI, income tax should not be filed by the due date but before the due date to avoid the last hours’ inconveniences and get benefits of early filing.
Due to a complicated tax system, understanding tax laws can be confusing and NRIs may miss claiming deductions and other benefits or miss filing ITR on time. At SBNRI, we have tax experts to resolve any queries that NRIs may have related to NRI income tax. You can download SBNRI App to connect with our NRI Income Tax Experts and get end-to-end assistance related to NRI tax filing. SBNRI will also help you get a lower TDS Certificate.
Yes, NRIs who have taxable income in India above Rs. 2,50,000 are required to file an Income Tax Return in India.
NRIs are not required to declare their foreign income or asset details in India. In the case of RNOR, the foreign income shall not be taxable in India. Foreign sources refer to income that accrues or arises outside India (except income earned from a business controlled in or a profession established in India).