The penalty for a late income tax return, ITR, is charged under section 234F of the Income Tax Act. According to the section, filing a return post deadline would make the defaulter liable to a maximum penalty of Rs. 5000/. The penalty has been reduced from the financial year 2021. Earlier it was Rs. 10000/. Further, as the time for rectification of errors, while filing has been reduced from two years to one year from the end of the financial year, it is prudent to file returns as early as possible. Late filing can also deprive you of the opportunity of carrying forward one’s losses if any to the next years to set off against one’s future income. There will also be a delay in receiving a refund from the Government if one is entitled to the same when income tax returns are not filed within the due date. Interest at the rate of 1% is also levied for every month or part of it on the tax amount unpaid as specified under section 234A. It is important to understand that returns cannot be filed until the tax has been paid. If you do not submit your ITR, the income tax officer can commence procedures for prosecution for a duration of 3 months to 2 years, as well as a fine. If you owe more tax, the time may be extended to ten years. Furthermore, in the instance of under-reporting of income, the income tax inspector may levy a penalty of up to 50% of the tax owed. Let us also look into the benefits of timely filing of income tax returns. It makes loan approval and claiming tax refunds easier. These returns also act as income and address proofs. It also makes visa processing simpler. Thus, in order to avail of the benefits and avoid these consequences, income tax returns should be filed in a timely manner.