While a belated return can still be filed within the prescribed timeline, missing the due date may restrict taxpayers from carrying forward certain losses, delay refunds and attract additional interest if taxes remain unpaid.
"The biggest financial mistake is often losing tax benefits that are available only if the return is filed on time. For many taxpayers, the real cost is not just the late fee, but the permanent or practical loss of tax flexibility," said CA Chandni Anandan, Tax Expert at ClearTax.
Missing the deadline can mean higher taxes later
One of the most significant consequences of delayed filing is the inability to carry forward certain losses, including capital losses, to future years. These losses are typically used to offset future capital gains, thereby reducing tax liability.
"If the return is filed late, the taxpayer may lose the right to carry forward certain losses, including capital losses, as per the applicable filing rules. This means those losses may not be available to offset future capital gains in later years," Anandan explained.
Tax experts say this is particularly relevant for active investors who rely on tax-loss harvesting as part of their overall tax planning strategy.
Late filing can delay refunds and attract additional interest
Taxpayers expecting an income tax refund do not lose their claim merely because they file after the deadline. However, they may have to wait longer to receive the money.
According to Anandan, a belated return generally results in delayed processing of refunds, meaning taxpayers lose timely access to funds that could otherwise have been used or invested elsewhere.
Another overlooked cost is interest on unpaid tax. In addition to the late filing fee under Section 234F, taxpayers with outstanding self-assessment tax may have to pay interest under Section 234A until the tax is paid and the return is filed.
While a belated return can generally be revised within the applicable timelines, filing a revised return does not erase the fact that the original return was filed after the due date.
The ₹5,000 late fee is only part of the cost of missing the ITR deadline. For many taxpayers, especially investors, the bigger impact could be the loss of valuable tax benefits that can increase their tax liability in the years ahead.