Penalties for Delay Filing of ITR and Change in Tax Rules and Forms

Penalty for Delayed Filing of ITR for AY 18-19 and Change in Tax Rules and Forms

Finally due date for filing of income tax retunes (ITR) for Assessment year 2016-17 and 2017-18 is over. Now its time to get ready for AY 2018-19 ITR to avoid penalty of late filing of income tax return. Government has introduced new income tax forms for AY 2018-19 and Several Important income tax changes have come into effect from the start of the new financial year, April 1, 2018. These include penalty on late filing of income tax returns (ITR), medical reimbursement and transport allowance becoming taxable, and a 10 percent tax on long-term capital gains (LTCG) from listed shares and equity-oriented mutual funds. Knowing these tax changes will help plan your income and taxes better in the new F.Y. A new section Sec 234F is inserted to levy penalty for late filing of ITR. Sec 234F is effective from Assessment Year 2018-19 (Financial Year 2017-18).

  • Penalty on late filing of ITR


Penalty (Amt.)

If the return is filed after the due date but before December 31 of that year


However, as relief to small taxpayers, if your income is not more than Rs 5 lakh, the maximum penalty levied will be


In other case (Filled after the 31st December of that year)


  • Reduction in the time limit to revise your ITR

Apart from penalty on late filing of ITR, if you make a mistake while filing for FY 2017-18, then you would have time till 31 March, 2019 to file your revised return. Earlier a taxpayer was allowed to revise his returns up till two years from the end of the financial year for which the return was filed. However, from now on, he will be allowed to revise his return only up till one year from the end of the financial year.

Therefore, for the financial year ending on 31 March, 2018, a person will have time till 31 March, 2019 to revise his ITR. The normal deadline for filing return for FY17-18 would be July 31, 2018. 

  • Medical reimbursement and transport allowance to become taxable

If your salary includes medical reimbursement and transport allowance, then these two items will become fully taxable in your hands from April 1. The proposal was announced in Budget 2018. 

Until and including FY 2017-18, income tax laws allowed transport allowance up to Rs 19,200 and medical reimbursement up to Rs 15,000 in a year to be claimed exempt from tax. Medical reimbursement was tax-exempt only if the actual bills were submitted to the employer but transport allowance did not require submission of bills. 

However, in lieu of the above allowances, standard deduction of Rs 40,000 from salary and pension will be available. You can claim this deduction next year for FY.2018-19 (assessment year 2019-20) at the time of filing ITR.

  • Hike in cess levied on tax liability

Starting from FY 2018-19, the cess levied on the tax liability will be hiked by 1 per cent to 4 percent, as proposed in the budget. The cess will be called ‘Education and Health Cess’, replacing the current 3 per cent education cess. 

You will feel this impact when TDS is deducted from your salary and at the time of paying your income tax liability. 

  • Levy of LTCG tax on shares and equity-oriented mutual funds

LTCG from the sale of shares and equity-oriented mutual funds will attract tax at a flat rate of 10 percent. Indexation benefit (adjusting the purchase cost with respect to inflation) will not be available. Further, LTCG up to Rs 1 lakh in one fiscal will be exempted from tax.

  • DDT introduced for equity mutual funds

Dividends declared in equity-oriented mutual fund schemes will come under the purview of dividend distribution tax (DDT) with effect from April 1. The tax will be levied at 10 percent and will be deducted by the fund house before paying dividends. 

  • Senior citizens to get more benefits

Starting from 1 April, interest income earned up to Rs 50,000 a year by senior citizens will be available for deduction. This includes interest income earned from savings bank/post office accounts, fixed deposits (FDs) and recurring deposits (RDs). This tax benefit is available to them under the newly inserted section 80TTB of the Income tax Act. TDS will be deducted only if interest income is more than Rs 50,000 in year. However, if you are claiming tax benefit under section 80TTB, you cannot avail it under section 80TTA. Under section 80TTA, interest earned from savings account (bank/post office) up to Rs 10,000 is exempt from tax.  

Additional benefits are also available on premium paid for medical insurance. Health insurance premium paid for senior citizens will be allowed a maximum tax-break of Rs 50,000 under section 80D.

Senior citizens who do not have health insurance can also avail this benefit for medical expenses incurred. It is advisable to keep the prescription and medical bills handy in case the tax department might require it in the future. 

Tax benefit under section 80DDB has also been increased to Rs 1 lakh for treatment of specified diseases such as chronic kidney diseases (CKD), cancers etc.

  • Changes in section 54EC

Bonds issued under section 54EC for saving tax on LTCG will be issued for a tenure of five years with effect from April 1, 2018, instead of three years. Added to this, it will be possible to save tax via these bonds for capital gains arising from only land, building or both. Earlier capital gains from other assets like debt mutual funds, jewellery etc could be invested in these bonds to save tax. 

  •   Tax-free withdrawal for NPS account holders

Self-employed and professionals will now be able to withdraw 40 percent of their National Pension System (NPS) corpus tax-free when they close or opt out of it. Salaried employees are already allowed to withdraw 40 percent of their NPS corpus tax-free



Before you embark on the process to file the return for the assessment year 2018-19 (financial year 2017-18), you need to be aware of some fundamental rules and key changes in the income tax return (ITR) forms this year. Knowledge of slab rates, for instance, can help you compute your tax liability correctly.

The slab rate applicable to an individual drawing taxable income between Rs 2.5 lakh and Rs 5 lakh has been reduced from 10% to 5%. This is also the year when taxpayers who own more than one property and claim tax benefits on the home loan interest paid will feel the pinch. Till the financial year 2016-17, you could avail of tax break on the entire interest paid – considered ‘loss’ – on home loan for let-out properties.

“The entire loss was allowed to be set off against other income without any limit,” But from this year, the tax rules have been changed. “The government has restricted the benefit of set-off loss from house property to a maximum Rs 2 lakh per financial year and the balance loss can be carried forward to next eight years.

While this has hurt taxpayers who had invested in property, another change in rule has made them smile. This pertains to capital gains/losses on investments and immovable properties. “Holding period for capital gains to be considered on immovable property has been reduced from three years to two years; also, year 2001 will now be the base year for calculating the capital gains,”   


This apart, the ITR forms too have undergone several changes this year. “Till last year, only net taxable figures of salary and house property income were required to be disclosed. This year, detailed calculations in respect of salary and house property income are required in ITR-1 and ITR-4. Address of property would also be required for house property income

Till last year, if an individual or Hindu Undivided Family (HUF) was a partner in a firm, ITR-2 could be used if they didn’t have any other business income. “Now, such individual or HUF shall be required to file its return in ITR-3 only irrespective of it has any other business income or not,” adds Sehgal. The forms this time provide a separate column for claiming capital gain exemptions under Sections 54, 54B, 54EC, 54EE, 54F, 54GB and 115F.



The next step is to identify the form that you need to use to file returns. “If you are using a private tax filing portal to file your return, it will automatically choose the correct form based on your income and assets.

However, if you are using the tax department’s portal, you will have to choose the form yourself. The I-T department has released seven forms this year – for salaried professionals or pensioners, the most relevant forms are ITR-1 and ITR-2.

If you are a self-employed professional or run a small business, you should use ITR-4. Ensure that you mention your name in the manner it appears on your PAN card. “The return will not be processed in case there is a PAN name mismatch,” he adds. Do not forget to update your e-mail ID and mobile number so as to receive timely communication related to return and refund processing. Quoting Aadhaar is a must for resident taxpayers.

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2 Thoughts to “Penalties for Delay Filing of ITR and Change in Tax Rules and Forms”

  1. Chandra Kant Choudhary


  2. Robina

    The given details are very useful.

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