Filing Corporate Tax Return

Importance Of and Penalties for Not Filing Corporate Tax Return

No matter how herculean a task it is to file corporate tax returns for your business, it is important to do so to prevent you from penalties. This mandatory rule is applicable to both small and large business organisations. Filing your business tax returns is an important aspect of your business management. It bears a wide variety of benefits that will work in favour of your business.

However, you can reduce the workload and hard labour of filing business tax returns if you have a competent team and an effective workforce to support you. You will not only be able to file your tax accurately but will also be able to do it well within the specified time limit.


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Importance of it

Filing corporate tax return is essential especially if you have a loss incurred under the ‘Profit and Gains of Business and Profession’ head. Your tax return will help you to carry forward this loss to the next financial year. It will thereby set off the desired amount in your future income. It will also result in the reduction of taxable income which means you will have a reduced amount as tax payable in the following year.

However, to carry forward your loss to the next year just take all necessary steps for Filing Corporate Tax returns in India before or on the due date.

Different benefits enjoyed

corporate tax

There are different benefits enjoyed if you file tax returns for your business on time and properly.

  • Applying for a loan will be easy and more effective if you have a proper tax file in your hand. If you want to raise capital for your business or want some sort of financial aid during a tight financial situation, you will be able to get business loans easily to alleviate the issues and open newer and better opportunities for your business. The banks will need the latest income tax return to provide a loan as that will help the bank to determine your income to debt ratio.
  • It will also save your business from penalty and prosecution as income tax evasion is a serious criminal offence. You will face severe penalties and even cancellation of registration in extreme situations if you fail to file your business IT returns on time. Even if you file it late, there are a few late tax filing penalties as well that may be levied on you.
  • You can obtain government tenders when you have an updated income tax return for your business. The IT file of your business will reflect the profile and status of your business along with your working capacity. If you are a contractor you will have a better chance to obtain new projects if you file accurate and audited tax returns on time. Your IT return will help in your tender approval by the scrutiny committee that might check your direct tax planning and other accounting processes for the past 5 or even 7 years to know that you are capable of doing the job.
  • You can claim depreciation on the assets that are in the name of your business as per the rule of the income tax department. However, such assets must be used for professional and business purpose and this claim is offered to the owner of the asset only.

While e-filing IT returns you can enjoy the benefits of depreciation claims in the deduction of your total tax payable amount. For this, you must have the profit calculated on the presumptive basis as per the clause 44AD or 44AE. This profit is calculated after deducting all depreciation as per section 32 and all business related expenditures.

Penalties for not filing

income tax retun

Any business failing to file the corporate tax return on time is subject to legal obligations and penalties. Usually, this may be a civil penalty where you file the IT return, pay all overdue taxes along with the penalties imposed on your related to it. Once you do so, the matter is closed.

However, if you do not file your corporate tax returns for a number of consecutive years, it will be considered as a criminal offence. Apart from these, there are different variations of penalties such as:

  • Penalty and interest – You will be noticed by the income tax department if you do not file your income tax returns. If you fail to file it even after such reminders you will be penalized for the same. Penal interest may be at the rate of 1% per month or any part thereof till the date you pay the taxes. However, the rate of penalty and the amount may vary depending on the circumstances.
  • Prosecution – The Supreme Court of India has passed recent judgment to categorically declare that it is the liability of the business or even an individual taxpayer for that matter to file a tax return on time and accurately. Any non-compliance will result in prosecution. If you do not pay the tax on time voluntarily then you are liable to be prosecuted. If you do not pay after the issuance of notice then you will be severely prosecuted.
  • Concealment penalty – If you do not file a corporate tax return but have the assessable income you will be penalised under the clause of concealment of income. This penalty can be as high as 100% to even 300 % of your income. Apart from that the Income Tax Act also includes a separate clause for the further penalty due to the offense committed by such concealment of income.

During prosecution proceedings, The Supreme Court of India has also held that the owner of the business of the taxpayer will have to prove the inability to pay taxes with enough substantial and circumstantial evidence. If they are unable to prove this then they are liable to further prosecution and penalty. Therefore, better have a corporate tax planning in place as the burden of paying taxes on time as well as proving inability to pay it entirely lies on the taxpayer. Therefore, follow the Income Tax Act or consult with an expert to avoid penalties.

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