Penalty for late filing of Tax Return – Late filing of an income tax return can lead to the forfeiture of several income tax benefits and may result in additional tax liability under the Income Tax Act 2023. In this blog post, we will discuss the implications of filing tax return after the due date for an individual assessee.
What is late filing of tax return ?
Section 171 of the Income Tax Act 2023 stipulates that each assessee must file their income tax returns on or before the Tax Day. Failure to do so is regarded as late filing.
Definition of Tax Day - for Individual
The definition of Tax Day is provided in Section 2(23) of the Income Tax Act 2023. According to Section 2(23) of the Income Tax Act 2023, Tax Day is defined as the 30th of November following the conclusion of the financial year (July to June in Bangladesh) for old assesses who have previously submitted their income tax returns. However, for new assesses who have not previously filed their income tax returns, Tax Day falls on the 30th of June of the subsequent year following the conclusion of the financial year.
When to file income tax returns ?
For New Assessees: As mentioned earlier, income tax returns must be submitted on or before the 30th of November.
For Old Assessees: Tax returns must be submitted on or before the 30th of June in the following year.
Is late filing allowed ?
Yes, you can file your income tax return after the designated Tax Day. However, in such cases, certain tax benefits may be forgone, and there can be instances where you’ll be subject to additional tax liabilities. Here are the details of forgone benefits and additional tax liability of late filling of tax return:-
Implications of filing tax return in late
In case of filing income tax return after the designated Tax Day certain tax benefits may be forgone, and will lead to additional tax liabilities. Here are the implications of filing tax return after due date:-
(a) No tax exemption
If you file your income tax returns after Tax Day, you will not be eligible for tax exemptions, resulting in a loss of tax benefits. For instance, let’s consider Mr. Rahim, a salaried individual. In the fiscal year ending on the 30th of June 2023, his salary components were as follows:
| Components of Income | Amount |
| Basic Salary | 340,000 |
| Festival bonus | 85,000 |
| House rent allowance | 204,000 |
| Medical allowance | 80,000 |
| Conveyance allowance | 45,000 |
| Total | 754,000 |
If Mr. Rahim files his income tax return within the Tax Day, he can claim a tax exemption equal to one third of his salary income or Tk. 450,000, whichever is lower. In his case, the exemption amount is Tk. 251,333. However, if he files his tax return after Tax Day, he will forfeit this benefit and be required to pay taxes on his entire income. Consequently, his income tax payable will be increased by Tk. 25,324 as a result of late filing of his tax return. Here is the full calculation:
(b) No tax free income
If an individual assessee has income that is ordinarily considered tax-free, such as income earned from ITES service/ business, and that individual fails to submit their tax return within the Tax Day, the consequence is that the previously tax-free income will now become taxable. This means that even income categories typically exempt from taxation will be subject to tax liability if the tax return is not filed within the stipulated deadline. It’s crucial for taxpayers to adhere to the tax filing deadlines to ensure that their exempted income retains its tax-free status. Additionally, they should consult with tax authorities or professionals for guidance on handling such situations and the potential implications.
For example, let’s consider Mr. Sumon Chowdhury, who had the following income during the income year ending on the 30th of June 2023.
| Components of Income | Amount |
| Income from ITES business | 3,350,000 |
| Income from Rental | 530,000 |
| Total | 3,880,000 |
| Less: Exempted income as per Para 21, Part 1 of 6th Schedule | 3,350,000 |
| Total Taxable Income |
530,000 |
His tax liability will be significantly higher due to late filing of tax return. Please see the below calculation:
(c) No Reduce tax rate
In the context of tax regulations, it’s essential to understand that any income eligible for a reduced tax rate will be treated as fully taxable if an individual fails to submit their income tax returns within the designated due date. This means that income which would have otherwise benefited from a lower tax rate will lose that advantage and be subjected to the standard tax rate when the tax return is not filed on time.
For instance, consider the case of Karim Traders, engaged in cattle farming. In the fiscal year ending on the 30th of June 2023, he earned an income of Tk. 3,350,000 from his farming activities. If he were to file his income tax return within the specified due date, he might be eligible for a reduced tax rate on his agricultural income. However, if he misses the deadline for filing his tax return, the agricultural income that would have enjoyed this reduced tax rate will now be considered as fully taxable income, leading to potentially higher tax liabilities. Hence, adherence to tax deadlines is crucial to optimize tax benefits and reduce tax liabilities. Here is the details of late filling implications:
(d) No investment rebate
It’s important to note that investment rebates, which serve as a valuable means to reduce one’s tax liability, will not be permitted for individuals who file their income tax returns after the designated Tax Day. This means that those who miss the Tax Day deadline will not be eligible to claim investment rebates, resulting in potentially higher tax liabilities.
For example, consider the scenario of Mr. Rahim who diligently planned his investments throughout the year to avail of the investment tax rebate. He ensured that his investments aligned with the provisions of the Income Tax Act and were eligible for the rebate. He invested Tk. 100,000 in Bangladesh Shanchaypatra. However, if he fails to file his income tax return within the stipulated time frame, all his efforts to secure the investment rebate will be in vain, as he will no longer be entitled to this tax-saving benefit. Therefore, it is crucial for taxpayers to meet the tax filing deadlines to maximize the advantages of investment rebates and minimize their overall tax obligations.
Here is the details calculation on tax implications due to late filing of tax returns.
(e) Additional tax u/s 174
Section 174 of the Income Tax Act 2023 provides clear guidelines on how tax liabilities are determined when income tax returns are submitted after the Tax Day.
As per Section 174 of the Income Tax Act 2023, the formula for calculating tax payable in such cases is as follows:
C = A × (1 + 0.04 × B)
Where:
C = Tax Payable when an assessee files income tax returns after the Tax Day;
A = Tax payment if the assessee files their income tax returns within the Tax Day, but in this scenario, any tax exemption, if applicable, shall not be allowed. Furthermore, investment tax rebates will not be permitted.
B = No. of month within which return submitted
In practical terms, this means that if an individual opts to file their income tax returns after Tax Day, they will be subject to a 4% higher tax rate compared to filing within the stipulated deadline. Additionally, any potential tax exemptions and investment tax rebates will be waived. Consequently, it is highly recommended to always aim for timely submission of income tax returns within the specified deadline to optimize tax benefits and minimize tax liabilities.
Here is the details calculation of additional tax in case of late filing of tax return, we assumed he submitted his income tax return as on 31 January 2024;
Conclusion - Penalty for late filing of Tax Return
Submitting an income tax return after the deadline could cause you to lose numerous tax advantages and might incur extra tax obligations as per the Income Tax Act 2023. In this blog post, we have discussed the consequences for an individual taxpayer of late tax return submission.
Penalty for late filing of Tax Return - Source/ Reference:
- Section 171 of Income Tax Act 2023;
- Section 2(23) of Income Tax Act 2023;
- Section 76 of Income Tax Act 2023;
- Section 78 of Income Tax Act 2023;
- Section 174 of Income Tax Act 2023;
- Para 21, Part 1, 6th Schedule of Income Tax Act 2023;
- SRO No. 157-Law/Income Tax/2022, dated 01 June 2022;
- National Board of Revenue (NBR);
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