Interest Income on IT Refund at Stake if You File Income Tax Late

Well, Income tax act is a weird act and one such thing which came to our notice is the importance of filing the returns timely else one loses the interest on the refund which is due.  Please read this writeup thorougly as not many tax preparers are aware of this provision.

Repercussions of filing late income tax return beyond 31 Jul

In case you claim a refund in your return of any advance tax paid/TDS, you would lose some of the interest (currently 6% per annum paid by the tax department) on such refund.

The interest on refund is normally computed from April 1 of the assessment year (the year immediately following the financial year for which the return is filed) till the date of grant of refund.

However, in case of a belated return (i.e. return filed after due date) interest is computed from the actual date of filing the return till the date when refund is granted.

This means loss of the interest that would have been paid for the period April 1 till date of filing the return. Even if you file the return one day after the due date you would be losing interest for at least four months - April, May, June and July (presuming due date is not extended beyond July 31).

Thus it is in your interest to press your tax return preparer to file the returns timely and remember to get free financial tips and updates from our site in your email by subscribing with your email id in the subscription  box.