Higher Late Fees payable even in absence of Income Tax Liability on belated ITR Filing when Income > ₹5 Lakhs

Income Tax Return Late Fees of Rs. 5000/- applicable in the absence of Liability to Pay Income Tax
Higher Late Fees payable - Income Tax Liability - ITR Filing - Income - taxscan

The Income Tax Return ( ITR ) late fees under Section 234F for the Assessment Year ( AY ) 2024-25 has thrown a bit of a curveball at individuals who file their income tax return even without having any tax liability, but being a belated return for various reasons.

The Income Tax Department has not changed the rules, but due to the introduction of a new tax regime with higher income tax exemption limits, a situation has arisen where taxpayers may end up paying a higher late fee even though they have no tax liability.

The Circumstances

Old Rule:  Section 234F of the Income Tax Act states a penalty of Rs 5,000 for late ITR filing if your total income exceeds Rs 5 lakh, and Rs 1,000 if it is below Rs 5 lakh.

New Regime: The new tax regime introduced for AY 2024-25 offers nil tax liability on income up to Rs 7 lakh.

The Curious Case

Even if your income falls under the new tax regime with nil tax liability (between Rs 5 lakh and Rs 7 lakh), the late filing fee applicable is still Rs 5,000 because your total income exceeds the Rs 5 lakh threshold under Section 234F.

This is different from previous assessment years where the higher late fee of Rs 5,000 applied only if you had tax payable after exemptions and deductions.

CA Abhas Halakhandi has tweeted on ‘X’ regarding this issue.

Replies to this include hope that the upcoming Budget 2024-25 will resolve this issue by bringing forth an amendment to the Income Tax Act.

One such comment also stated,

“There are penalties on taxpayer for working hard to earn for the IT dept/govt.

But no penalties on @Infosys the portal creator and @IncomeTaxIndia the portal responsible govt dept for doling out a sloppy filing & compliance system.

Only Death and Taxes are certain.”

An Example

Total Income: ₹6.00 Lakhs (say, income from Salary)

Tax Payable: ₹0 (due to nil tax liability under the new regime)

Late Filing Fee: ₹5,000 (because total income exceeds ₹5 lakh threshold under Section 234F).

In this scenario, even though the taxpayer has no tax liability due to their income falling under the exemption bracket of the new regime, they still incur the higher late filing fee of ₹5,000 for filing their ITR late. This is because the late filing fee is based on total income exceeding ₹5 lakh, not on tax liability.

Here’s what you can do now to avoid late fees

File your ITR on time to avoid late filing fees, and if you are unsure about which tax regime to choose, consult a tax advisor or a Chartered Accountant ( CA ).

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