Typically, the deadline for filing income tax return of the previous financial year is July 31. In case a person missed the July 31 deadline, he was allowed to file a late income tax return within two financial years from the end of the relevant tax year.
But Budget 2016 has proposed a change and the window for filing late return has been reduced from two years to one year.
"As per the amendments proposed in the Finance Bill 2016, the time allowed for filing a return of income has been reduced from two years to one year from the end of the financial year to which the return pertains to," says Amit Maheshwari, managing partner, Ashok Maheshwary & Associates.
This new rule will be applicable from April 2017, meaning that for the financial year starting April 2016, you will be able to file late income tax return by March 2018, instead of March 2019 earlier.
Also, according to the Finance Bill, one can revise the late income tax return, which was not allowed earlier. Before this change, late return was considered final return and filers were not allowed to make any changes in it. Now a person can revise the return in case of any omission or wrong statement within two years from the end of the financial year to which the return pertains to.
However, certain drawbacks of filing a late return still remain. If you are filing a late return and there was any tax payable, you will have to pay an interest at the rate of 1 per cent per month up to the date of filing of the return.
Also, in case of late return, you can't carry forward your capital losses to next years. Generally, a person can carry forward the capital loss for a financial year to next eight years to set them off with capital gains.
One can claim tax refunds by filing a late income tax return but one will lose on the interest component. "The interest on refund would be payable from the date of filing the return. Which means you lose interest from the start of the assessment year to date of filing of belated return," says Sudhir Kaushik, co-founder of TaxSpanner.com.