Income Tax Return e-Filing for AY 2019-20: Filing ITR is important. So, make quick, informed financial decisions to ensure you don’t miss the deadline.
e-filing of Income Tax Return 2019-20: People earn money during the entire financial year and spend it as per their requirement. However, sometimes they forget to keep aside the tax amount and use it on other expenditures. In such a situation, the taxpayer may find it difficult to timely pay the tax while filing his/her Income Tax Returns. So, if you don’t have adequate funds in hand to pay for the taxes, here are some options you can consider. But before that, let’s understand…
What happens if you fail to pay income tax on time?
According to the Income Tax rules, if you fail to file the ITR within the prescribed deadline (31 July of the respective assessment year), you may be liable to pay a penalty as per the applicable rate. For taxpayers having an income less than Rs 5 lakh, the maximum penalty goes up to Rs 1,000. If your income is more than Rs 5 lakh, you may be liable for a penalty up to Rs 5,000 if the return is filed after the due date but before 31 December of the AY, and up to Rs 10,000 if the return is filed after 31 December of the relevant AY.
Likely scenarios when taxpayers fall short of tax money
There could be many reasons due to which a taxpayer might fall short of the tax money while filing the returns. Some taxpayers mistakenly think that the entire income during a financial year is their own and ignore the tax liability that may be applied on such income — later they fall short of the tax money.
Even if they’ve earmarked the tax money, at times they end up spending it on other things, especially while tackling a financial emergency.
Another common situation is when taxpayers make a calculation mistake while assessing their tax liability and prepare accordingly – only to get a rude shock while filing the returns when they realise that their earmarked funds are insufficient to pay off their tax dues in total.
So, how to arrange for funds to pay tax?
Before that, ensure that you’ve absolute clarity on your total tax liability for the relevant assessment year. Don’t forget to factor in income from other sources (like income/loss from house property, presumptive business or profession, dividend income exceeding Rs. 10 lakh, agricultural income, etc.), capital gains, and so on and so forth. Consult a chartered accountant if you get stuck.
Once you know exactly how much you owe in taxes, the best solution is to save that much in your bank account or in a safe short-term investment instrument like a fixed deposit or recurring deposit.
But if you’re unable to arrange for the tax money, here are a few options that you can consider:
1. You can apply for a loan against your investments like shares, Public Provident Fund, FDs, life insurance policy, etc. Adding collateral will bring down the interest component on the loan, especially when compared against unsecured loans like a personal loan. You can also raise funds quickly by taking a loan against your gold.
2. If you don’t have any security to pledge, you can consider taking a personal loan (provided you have a decent credit score) or a pre-approved loan against your credit card (provided your card has that option). However, remember both these loan facilities come with higher interest charges than a secured loan. So, ensure you go for a loan only if you can afford to repay all the instalments in time without jeopardising other important financial commitments to avoid debt accumulation and an impacted credit score.
3. You can also consider liquidating certain investments like FDs and liquid funds to arrange for the tax money.
4. If you’re expecting maturity of an investment or money from any other source in a few weeks, you may want to pay off the taxes with your credit card before the deadline and repay the card bill with the help of the extra money within the interest-free period.
5. Lastly, you can seek help from friends or family to raise the fund or dig into your emergency fund. However, ensure you repay them in time or replenish your emergency fund as soon as possible.
Make quick, informed decisions to ensure you timely file your returns
There is the cost of missing out the due date for filing the ITR, and there is the cost of borrowing fund to pay the tax when you don’t have adequate money in hand. In many cases, the cost of missing the ITR due date is higher than the cost of borrowing the fund to pay for the taxes. For example, if you want to carry forward losses, you may miss it if ITR is not filed on time.
So, closely evaluate your finances and make quick, informed decisions if need be so that you don’t miss out the tax filing due date. Remember, filling your returns is not just a formality. Your ITRs are very important when you apply for a loan or want to buy a life insurance policy with a high sum assured – even to apply for a visa to certain countries. Paying your taxes in time will also ensure there are no notices or inquiries from the I-T Department. As such, financial discipline in timely payment of your taxes will go a long way to secure your financial future and minimise chances of any unpleasant surprises later.
(The author is CEO, Bankbazaar.com)