Don't miss the tax returns deadline!

Yes, today is the last day for filing income tax returns. Most take comfort from the fact that since tax has been deducted by their companies, filing returns can be delayed. But, the latter is equally important.

So, what can you do? Well, for starters, try and file today. But, if the documentation is not in place, don't be dismayed. There are enough opportunities. For one, returns can be filed till July 31 (for income year 2009-10) without penalty.

But what if you have not filed returns for 2008-09 as well? The income tax (I-T) department is lenient here and allows you to file back-dated returns for the past two years. In other words, returns of 2008-09 can be filed till March 2011.

Homi Mistry, tax partner, Deloitte, Haskins and Sells, said, "In spite of the two-year advantage, if you missed the March 31, 2009, deadline, file your belated returns in the next financial year by March 31, 2010, without any penalty."

"It (tax returns) may be furnished any time before the expiry of two years from the end of the financial year in which the income has been earned," says the department.

But, after the first-year breather come penalties. That is, if returns for  2007-08 are filed after March 31, 2009, there will be a flat penalty of Rs 5,000. Importantly, there should not be any tax liability.

However, if you give a reason for not filing on time, like accident, hospitalisation or deputation abroad, the department mat waive the fixed penalty. But, if there is any outstanding tax to be paid, you may have to pay 1 per cent per month on the amount.

Kaushik Mukherjee, executive director, PricewaterhouseCoopers, said, "There are two simultaneous interest charges being levied on you under Sections 234(A) and 234(B)." Section 234(A) deals with delay in filing returns and imposes an interest of 1 per cent a month from August of the assessment year (August 2008 in this case).

Section 234 (B) deals with delay in depositing advance tax and charges 1 per cent interest per month starting April 1, 2010, till such time the outstanding amount is paid. "Section 234(B) is applicable only to those who have an outstanding tax liability exceeding Rs 10,000," said Mukherjee.

But, if you do not file returns in time, you may lose some benefits available. "You will not be able to set off or carry forward any losses incurred on account of transfer of capital assets in financial year 2008-09," said Mistry.

For instance, if you sold a property in 2008-09 at a loss of Rs 50,000, there is a provision to set off this against gains made in the next eight years. But, if returns are not filed during the next assessment year (March 2010), you cannot take this benefit.

There are other benefits of filing returns as well. If applying for a home loan or a personal loan, income tax papers come in very handy. A good record can ensure quick processing of the loan and substantially reduce hassles. Also, if you want to travel abroad, income tax papers have to be part of the visa application.

Here's the worst part. If you do not file your returns within two years, you will not be allowed to file at all. And, one fine day, the I-T department can call you and seek documents for the past six years. That's one scary thought.