If you fail to file ITR before 31 July, Can face Consequence

If you fail to file ITR before 31 July, can result in consequences FY 2023-24

Missing the ITR filing deadline of 31 July can indeed have significant consequences for taxpayers this year, particularly due to the new provision related to the old and new tax regimes. Details is here under :

1. No Old Regime

   • Automatic Shift to New Regime: For the financial year 2023-24, if you fail to file your Income Tax Return by 31 July, you will automatically be shifted to the new tax regime. This applies even if you have already paid taxes and submitted proofs for deductions and exemptions under the old tax regime.
   • Loss of Benefits: The new tax regime does not offer the same deductions and exemptions as the old regime. This can result in a higher tax liability, as taxpayers lose out on benefits such as deductions under Section 80C, 80D, and other exemptions.
   • Higher Taxes with Interest: As the new regime lacks many of the deductions and exemptions of the old regime, taxpayers might end up paying more taxes. Additionally, any outstanding taxes will attract interest under Section 234A.

2. Late Fee and Penalty

   1. Late Filing Fee: Under Section 234F of the Income Tax Act, a late filing fee of Rs 5,000 will be imposed if you miss the deadline. If your total income does not exceed Rs 5 lakh, this fee is reduced to Rs 1,000.
   2. Interest on Outstanding Tax: According to Section 234A, interest at the rate of 1% per month or part thereof will be charged on the outstanding tax amount from the due date until the return is filed.

      3. No Carry Forward of Loss and Setoff

Inability to Carry Forward Losses: If you incur losses from sources such as the stock market, mutual funds, properties, or business, you can normally carry them forward to offset against future income, reducing your tax liability. However, failing to file your Income Tax Return by the deadline means you lose this benefit, and such losses cannot be carried forward to subsequent years.

Missing the ITR filing deadline of 31 July

In the case of F&O Loss 

• The new provision regarding the automatic shift to the new tax regime is particularly impactful. Many individuals might not be aware that failing to meet the filing deadline results in forfeiture of the benefits tied to the old tax regime, forcing them into a potentially more costly tax situation.
• While the late fee, penalty, and interest for late filing, as well as the inability to carry forward losses, are standard provisions, the automatic shift to the new regime is a new and significant change for Financial Year 2023-24.

Income Tax Form :

Which ITR Form is Right for You?

ITR 1 (Sahaj) – For Salaried Individuals with Simple Income

Who can use this:

• Resident Individuals (not HUF or NRI)
• Total income ≤ ₹50 lakh

Sources of income allowed:

• Salary/Pension
• One house property (no carry-forward loss)
• Other income (interest, family pension)
• Agricultural income ≤ ₹5,000

Not allowed if:

• Director in a company
• Holds unlisted equity shares
• Crypto/Virtual Digital Assets (VDAs)
• Foreign income/assets
• Brought forward losses

ITR 2 – For Investors, NRIs, Capital Gains, Multiple Properties

Who can use this:

• Individuals or HUFs (Not earning from business/profession)

Sources of income allowed:

• Salary/pension
• Multiple house properties
• Capital gains (any amount)
• Foreign income/assets
• Agricultural income > ₹5,000
• NRIs, ROR with foreign income
• Director in company/unlisted shares
• Spouse’s clubbed income (except business)

Not allowed if:

• Business or professional income

New: Excel utility now includes validation under Section 139AA (PAN-Aadhaar link).

ITR 3 – For Business Owners, Freelancers, Partners

Who can use this:

• Individual/HUF with:
  • Income from business or profession
  • Partner in a firm (not LLP)
  • Income from speculative business (futures & options, crypto)
  • Unlisted shares, directorship
  • Multiple sources including foreign income/assets

Use this if ITR 1, 2, or 4 do not apply.

If opting out of the new tax regime, use Form 10-IEA.

ITR 4 (Sugam) – For Presumptive Taxpayers

Who can use this:

• Resident Individual, HUF, or Firm (other than LLP)
• Business or profession under presumptive taxation (44AD, 44ADA, 44AE)
• Income ≤ ₹50 lakh

Not allowed if:

• Director in company
• Holds unlisted equity shares
• NROR/NRI
• Foreign income/assets
• Carry-forward losses
• Freelancers under tax audit (above limit)

ITR 5 – For LLPs, AOPs, BOIs, Co-operative Societies

Who can use this:

• LLP
• AOP/BOI
• Co-operative society
• Trusts
• Partnership firms (excluding individuals/HUFs)

Not for:

• Individual, HUF, or Company

Use Form 10-IEA to opt out of new tax regime.

Don’t Forget Tips (Bottom of the Image)

• Received dividends or capital gains from shares? Use ITR 2 or 3
• Freelancers? File ITR 3 (under audit) or ITR 4 (under presumptive)
• Use Form 10-IEA if you opt out of the new regime
• Crypto trading? You must file ITR 2 or 3
• NRIs & RORs with foreign income/assets? Use ITR 2 or 3

Reporting of Different Trading Income in ITR Filing

• Intraday trading is considered as speculative business income. As per the Income Tax provisions, any loss on intraday trading can be set off only with intraday (speculative) gains. And as per my understanding ITR-2 form is for individuals and HUF receiving income other than income from ‘Profits and Gains from Business or Profession’. Since intraday trading is considered a business income, you must file ITR-3 and prepare financial statements

Income Tax on F&O Trading and ITR Filing