What will happen If you do not file the Tax Return by November 30, 2024?

The Inland Revenue Department (IRD) has introduced critical changes for the Year of Assessment (Y/A) 2023/2024. Effective from April 1, 2023, it is mandatory for all individuals—not just companies—to file tax returns online. This requirement is stipulated under Section 113(1B) of the Inland Revenue Act No. 24 of 2017, as amended by the Inland Revenue (Amendment) Act, No. 4 of 2023.

Filing Deadline

  • Deadline: November 30, 2024
  • Importance: Filing by this date is crucial to avoid penalties and ensure a limited assessment window.

Time Bar Provisions: Inland Revenue Act No. 24 of 2017

Assessment Limitations:

  1. Section 135(2):
    The Assistant Commissioner may amend a self-assessment within 30 months from the date the self-assessment return is filed.

    • Example: If you file your tax return on November 30, 2024, the IRD can review or reassess your return until May 30, 2027.If you are unable to file the tax return by the due date, the 30-month period is calculated from the date you submitted it.Implications for Taxpayers:

  • Timely Filing (by November 30, 2024):
    If you file your return on time, the IRD can only assess or inquire within 30 months.

    • Example: Filing on time protects you from unexpected audits beyond May 2027, unless fraud is involved.

  • Late or Non-Filing:
    If you miss the deadline, the IRD extends this period to 4 years, increasing the risk of inquiries and assessments.

    • Example: Suppose you forget to file your return by the due date but file it on January 10, 2025. The IRD can inquire about this return up to January 10, 2029.

Fraud or Willful Evasion:

In cases of fraud, gross negligence, or willful misrepresentation, the IRD can assess or reassess taxes at any time, with no time bar limitations.

  • Example: If the IRD discovers you underreported income intentionally in 2023/2024, they can reassess your return even in 2030 or beyond.

Penalties for Non-Compliance (Section 178):

  1. Late Filing Penalty:
    The greater of:

    • 5% of the tax owed, plus 1% for each month (or part thereof) of continued non-compliance.
    • Rs. 50,000, plus an additional Rs. 10,000 for each month after November 30, 2024.
    • Example: If your tax liability is Rs. 200,000 and you file your return 6 months late:
      • 5% of Rs. 200,000 = Rs. 10,000
      • 1% for 6 months = 6% of Rs. 200,000 = Rs. 12,000
      • Total penalty: Rs. 22,000 or Rs. 50,000 (whichever is greater).

  2. False or Misleading Statements (Section 181):
    Penalty is the greater of:

    • Rs. 50,000
    • The amount by which the tax payable would have been reduced or the refund increased.
    • Example: If you incorrectly claim a tax refund of Rs. 100,000, the penalty could be up to Rs. 100,000.

  3. Failure to File (Section 189):
    Subject to:

    • A fine up to Rs. 10 million
    • Imprisonment up to 2 years
    • Or both such fine and imprisonment.
    • Example: If you completely fail to file your return and the IRD detects it, you may face severe penalties, especially for significant tax evasion.

Special Consideration for November 30, 2024 (Section 119):

If a due date falls on a day when the IRD is closed, taxpayers can file on the next business day. However, as per the IRD notice on November 25, 2024, the department will be open on Saturday, November 30, 2024. Therefore, this provision does not apply, and returns must be filed by the original deadline.

  • Example: If you attempt to file on Monday, December 2, 2024, the IRD will consider your return late, as they were open on the deadline day.

Conclusion

Ensure you file your tax return for the 2023/2024 Y/A by November 30, 2024, to avoid penalties and minimize the risk of extended assessments. Compliance with the IRD's new mandatory requirements is essential for all individuals and businesses in Sri Lanka.

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