Taxpayers are eagerly waiting for the budget, and they have high hopes once again. They anticipate changes such as tax exemptions, new options, and increased limits for tax-free investments.
However, the main concern is addressing an injustice. To explain, consider if you borrowed money at a 12% interest rate but later lent money to the same person at a fixed 6% interest rate.
This situation lacks fairness and equality. Similar unfairness occurs in the tax system, and taxpayers hope for a resolution.
As the country’s general budget (Budget 2024) approaches, with Finance Minister Nirmala Sitharaman set to present it on February 1, 2024, taxpayers expect measures to reduce discrimination in Income Tax. Now, let’s delve into the issue at hand.
Why is there a higher penalty for late tax payments?
Every taxpayer wishes for something from Finance Minister Nirmala Sitharaman. It’s crucial for everyone to pay taxes and file returns on time, or else the Income Tax Department imposes penalties.
If you fail to file your return on time, a 1% interest charge accumulates from the day of the deadline.
If you were supposed to pay advance tax but didn’t, you’ll face a 1% interest charge per month.
Interestingly, if you overpaid tax and are eligible for a refund, the Income Tax Department provides interest, but only half a percent per month.
Importantly, this interest starts not from the day of excess payment but from the day your assessment is complete and the department acknowledges your payment.
This rule seems imbalanced – 12% while taking, 6% while giving, 1% per month while taking, and half% per month while giving.
This inequity needs correction. Interest on refunds should be paid in the same manner as interest is charged on income tax.
According to the Principle of Natural Justice, there should be equality. The Finance Minister is urged to address this in the upcoming budget.
What do experts suggest?
Experts argue that if you file your tax late or make a mistake, interest starts accumulating from the first day.
However, when it comes to interest on an Income Tax Department refund, it only seems to accrue after the assessment.
Taxpayers may have valid reasons for being late, such as financial constraints or other obstacles, but the Income Tax Department has both the funds and the system.
Therefore, taxpayers request equal interest on delayed refunds – 1 percent, just like the penalty for late payments.
