Why Did the Center Refuse to Extend the Deadline for Income Tax Return (ITR) in 2022?
The Income Tax Department recently refused to extend the deadline for filing Income Tax Returns (ITR), marking the first time in three years that such a decision has been made. This has prompted concerns and discussions among taxpayers and stakeholders alike. Here, we explore the reasons behind this decision and provide insights into the context surrounding it.
The Fine for Late Filing
A new fine of Rs 5000 has been introduced for late filing of Income Tax returns, underscoring the seriousness with which the tax department is now approaching the filing process. This measure is part of a broader effort to ensure timely compliance from taxpayers.
No Significant Tech Glitches
Contrary to popular belief, no significant technical glitches or errors were reported during the current filing period. This implies that the Income Tax Portal is functioning well, providing a reliable platform for taxpayers to file their returns.
Historical Context of Extensions
It is important to note that this is not the first such instance of non-extension in three years. In fact, it is the second time in the past 11 years where the due date was not extended. Historically, the Income Tax department has been quite lenient with the due date for filing ITRs, extending the deadline in 9 out of the past 10 years. This pattern has raised questions about the sustainability of such extensions in the long run.
Implementing the Updated Return Option
This year, the government introduced the 'Updated Return' option, which allows taxpayers to file with additional taxes. Promoting the use of this updated return is a critical part of the decision not to extend the due date. By sticking to the originally assigned deadlines, the department aims to firmly establish a clear and consistent message to taxpayers.
Reasons for Non-Extension
Two primary reasons underlie the decision not to extend the deadline:
The absence of a pandemic-like situation or any other significant reasons that would hinder taxpayers from filing their returns on time. This implies that taxpayers should be capable of meeting the due date without undue difficulty.
A desire on the part of the government to convey a strong message to taxpayers that extensions are no longer the norm. This is to shift taxpayer behavior towards timely compliance, reducing the reliance on last-minute rushes and penalties.
Data and Insights
Statistics further support the government's decision. For instance, last year saw approximately 6 crore ITRs filed, whereas this year, only around 2 crore ITRs had been filed by the 20th of July 2022. This stark figures suggest that many taxpayers are adopting a ‘wait and file later’ strategy due to the perceived likelihood of extensions. Consequently, the government decided against extending the deadline to encourage prompt filing and to generate additional revenue through late fees and penalties.
By adhering to strict deadlines, the Income Tax Department hopes to foster a culture of timely compliance among taxpayers, ultimately leading to a more efficient and effective tax system.