Legal Action, Penalties & How to Fix It in 2025

Skipping ITR in India: It’s easy to put off tax filing, particularly if you think you don’t owe a lot. But skipping your ITR filing particularly for years can bring serious legal and financial issues. Whether you’re salaried, a freelancer or business owner, here’s why staying on top of your ITR is not just wise it’s imperative.

Skipping ITR in India: Legal Implications

1. Penalties under the Income Tax Act

In case you don’t file your ITR, the Income Tax Department can impose a penalty under Section 234F. This can extend to ₹5,000 for each year lost (if your income is over basic exemption limit). Serial defaults can also draw prosecution.

2. Prosecution and Jail Time

Under 276CC of the IT act, non-filing of ITRs can result in a prosecution resulting in imprisonment from 3 months to 7 years, depending on the amount of tax evaded.

3. Scrutiny and Notices

Non-filers are more susceptible to flagging by Income Tax Department’s AI-based data analytics system. If your financial lifestyle (expensive transactions, overseas travel, etc.) doesn’t fit your filing status, expect attention or notice under s. 142(1) or 148.

Financial Drawbacks

1. Loss of Refunds

If you’re due a refund and don’t file, you lose it. You have until one year from the end of the assessment year to claim refunds.

2. Ineligibility for Loans

Banks and NBFCs need your last 2–3 years’ ITRs for home, car, or personal loans. Missing ITRs may lead to your loan being rejected or you end up paying higher interest rates because of no proof of income.

3. Missed Carry-Forward of Losses

If you have capital losses (say from stocks/mutual funds), you can’t carry them forward to future years for tax benefit unless you file your ITR on time.

Income Tax Refund Status 2025: Step-by-step guide to track your ITR refund online

What to Do If You’ve Missed Previous ITRs?

1. File a Belated Return

You can submit a late return under Section 139(4) for up to 2 years in certain instances (recently changed from 1 year), however fines and interest will be levied.

2. Use Updated Return Option

Introduced under Section 139(8A), the ‘Updated Return’ enables filing ITR for past 2 years with extra tax payment (25%-50% of due tax).

3. Talk to a CA or Tax Professional

If you’ve missed multiple years, see a chartered accountant. They can assist with back returns, notice responses, and penalty avoidance.

In an era where every transaction is trackable from credit card statements to your portfolio, jumping your ITR isn’t worth it. Be it one missed year or a string of them, the sooner you get your tax records regularized the better. Filing your ITR is not an option it’s a duty

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