Fee for default in furnishing return of income.

428

Without prejudice to the provisions of this Act, where, a person required to furnish a return of income under section 263 fails to do so within the time as prescribed in section 263(1) he shall pay, by way of a fee,––

• (a) a sum of five thousand rupees, if the total income of such person exceeds five lakh rupees;
• (b) a sum not exceeding one thousand rupees in any other case.

Explanation

Section Summary:

Section 428 of the new income tax law imposes a fee on individuals or entities who fail to file their income tax return (ITR) within the prescribed deadline under Section 263(1). The fee is levied as a penalty for non-compliance with the filing requirement, and the amount varies based on the taxpayer's total income.

Key Changes:

• Introduction of a Fee for Late Filing: Previously, late filing of income tax returns could attract interest or penalties under other provisions, but this section specifically introduces a fixed fee for failing to file the return on time.
• Income-Based Fee Structure: The fee is differentiated based on the taxpayer's total income. If the total income exceeds ₹5 lakh, the fee is ₹5,000; otherwise, it is capped at ₹1,000.

Practical Implications:

• For Taxpayers: Individuals and entities must ensure timely filing of their income tax returns to avoid this fee. The fee is in addition to any interest or penalties that may apply under other sections of the law.
• For Businesses: Companies and firms must adhere to filing deadlines to prevent additional financial burdens.
• For Compliance Processes: Taxpayers need to be aware of the specific deadlines under Section 263(1) and ensure their returns are filed within the stipulated time to avoid this fee.

Critical Concepts:

• Total Income: This refers to the taxpayer's gross income before deductions under Chapter VI-A (e.g., deductions under Section 80C, 80D, etc.).
• Section 263(1): This section specifies the due date for filing income tax returns. The fee under Section 428 applies if the return is not filed by this date.
• Interaction with Other Provisions: The fee under Section 428 is separate from other penalties or interest that may apply for late filing or underpayment of taxes.

Compliance Steps:

1. Determine Filing Deadline: Check the due date for filing your income tax return under Section 263(1).
2. File on Time: Ensure the return is filed before the deadline to avoid the fee.
3. Calculate Total Income: Verify whether your total income exceeds ₹5 lakh to determine the applicable fee amount.
4. Pay the Fee if Applicable: If the return is filed late, pay the fee along with any other applicable penalties or interest.

Examples:

• Scenario 1: Mr. A has a total income of ₹6 lakh but fails to file his return by the due date. He will be required to pay a fee of ₹5,000 under Section 428.
• Scenario 2: Ms. B has a total income of ₹4 lakh and files her return after the due date. She will be required to pay a fee of up to ₹1,000 under Section 428.

This section emphasizes the importance of timely compliance with income tax return filing requirements to avoid additional financial penalties.