Should Income Tax Return filing be done by July 2020 or wait till Nov 2020

The Income Tax Department has extended deadlines for Income Tax return filing for individuals from 31 July 2020 to 30 November 2020. This provides relaxation to all the individuals in this present Pandemic situation. But it might not be beneficial to drag your ITR filing to November for all taxpayers.

The Taxpayers for whom Income tax return filing by July is preferable

  1. The Taxpayers who have not paid 90% tax amount as advance tax.
  2. Persons who have a refund of income tax in the previous year.
  3. The Taxpayers who have capital gains transactions in the previous year.
  4. Pensioners / retired personnel having income more than 5 lakhs.
  5. Self-employed businessman who pays tax at the time of ITR filing.

Why ITR filing by July is preferable for above stated individuals

  1. In case of refund, the income tax department follows FIFO method i.e. First in First Out basis so sooner the better for taking refunds. So one who files return in July is likely to get his refund earlier than one who files in November.
  2. In case of delay in payment of tax, simple interest at 1% per month will be charged on tax payable from due date. So, more the delay, more will be interest payable on the tax due.

To put it in legal terms this extension for income tax return filing online will give relief from interest u/s 234A and penalty under 234E. But interest u/s 234B and 234C will continue to be levied for delay in paying the taxes.

Few relief measures are given by the Income-tax department due to COVID-19 pandemic situation-

  1. In order to provide relief to small taxpayers, the date for payment of self-assessment tax whose tax liability is up to Rs 1 lakh has been extended to 30 November, 2020.
  2. However, the CBDT statement noted that there will be no extension of date for the payment of self-assessment tax for the taxpayers having self-assessment tax liability exceeding Rs. 1 lakh. In such a case, the whole of the self-assessment tax shall be payable by the due dates specified in the Income-tax Act, 1961 and delayed payment would attract interest under section 234A of the IT Act.
  3. The date for making investment/ construction/ purchase for claiming rollover benefit/ deduction in respect of capital gains under sections 54 to 54GB of the IT Act has also been further extended to September 30, 2020. Therefore, the investment/ construction/ purchase made up to September 30, 2020, shall be eligible for claiming deduction from capital gains.
  4. The date for making various investments/payments for claiming deduction under Chapter-VIA-B of the IT Act which includes section 80C (LIC, PPF, NSC, etc.), 80D (Medi claim), 80G (Donations), etc has also been further extended to July 31, 2020.
  5. The furnishing of the TDS/ TCS statements and issuance of TDS/ TCS certificates being the prerequisite for enabling the taxpayers to prepare their return of income for FY 2019-20, the date for furnishing of TDS/ TCS statements and issuance of TDS/ TCS certificates pertaining to the FY 2019-20 has been extended to July 31, 2020, and August 15, 2020, respectively.
  6. The central government earlier slashed TDS/TCS rate for non-salary payments to residents by 25% for the remaining months of the fiscal and extended the due date for filing ITR for 2019-20 till November 30, 2020.
  7. The date for commencement of operation for the SEZ units for claiming deduction under section 10AA of the IT Act has also been extended to 30 Sep, 2020, for the units which received approvals by 31 March, 2020.

The department has created balance by giving benefits of extension to small taxpayers and asking the large taxpayers to pay their tax as per due dates. Due to this pandemic situation, the Government needs money to grant relief packages and provide for essentials to the poor.

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