Filing 3 ITRs at a Time | CA Shahid Raza Khan

Filing 3 Income Tax Returns at a Time: Pros, Cons & Practical Risks

Hey folks, in recent times many clients come to me to file three years’ ITR at a time. Most of them do this for availing loans from banks. Today, I thought let’s go through whether one should file three years’ ITR at the same time or not. What will be its pros and cons?

Let’s start with the Pros (Benefits) first.

1. Compliance

Yes, I would like to say that more than getting a loan, getting compliance done is a more important benefit of filing your ITR for three years.

Let’s take an example: Three years back, Mr. Modi made a land transaction of ₹50 lakh and he didn’t file ITR for that year. As per law, the Income Tax Department can send a notice for up to the next six years, and definitely the department will send him a notice. Why? Because the registrar of property (government office) has already reported to the department that Mr. Modi have sold/purchased land for ₹50 lakh.

But even if after three years Mr. Modi file ITR and pay tax if require, then most likely he will not get that notice, and he will save his money on penalty and interest, as well as the time required for replying.

Apart from compliance, filing multiple ITRs also plays an important role in financial verification.

2. Helpful for Loan, Visa & Financial Verification

Generally, banks and visa offices ask for three years’ ITR for any loan application. Why? Because it shows consistency and establishment of your business.

Therefore, a person having consistent income for the last three years shows that the income is regular income and the business is likely to survive in the future as well.

But—but—but, most banks do not accept three years’ ITR filed within a single day or in a short period, because it indicates that the returns were filed only for loan purposes and not as a regular compliance practice. Banks prefer that there should be at least a gap of six months between two years’ ITR filings.

But still, if your Form 26AS / AIS already reflects income, receipts, and TDS, and you have a strong reason for filing three years’ ITRs at one time, then banks may accept it.

Example: Mr. Bhushan started a poultry farm business three months back, and he has successfully completed two cycles of 45 days. Now, Bhushan is thinking of expanding the business, and for that he requires funding of ₹1 crore.

He enquired at a bank and came to know that the bank requires three years’ income proof for a loan. He then went to a consultant and filed three years’ ITR, showing that he has been doing the poultry business for the last three years and showing income accordingly.

Here, the bank will not accept these three years’ ITR because they have been filed recently and not as per the actual timeline. Also, considering that the poultry business is a risky business, it is not feasible for the bank to give him such a huge amount of loan. Of course, Bhushan can go for small loans or government-sponsored scheme loans.

3. Better Financial Record & Continuity

Even if a person does not want a loan and has not done any transaction which may trigger a notice, but is earning more than the exemption limit (that is ₹3 lakh), then one should file ITR for consistency and compliance.

Example: Let’s say Ms. Vaidehi runs a boutique business and her annual income is around ₹10 lakh. She is aware that she does not need to pay any tax up to ₹12 lakh. After three years, Vaidehi went to buy a luxury car of around ₹35 lakh out of her income in cash. Now, the car dealer deducted TCS of ₹35,000 from her, and in the next year she filed her ITR and got her TCS refund.

She has not taken any loan and has bought the car in cash and shown income of ₹10 lakh in the fourth year and got a full refund, but she may receive a notice asking how, with an income of ₹10 lakh, she purchased a car worth ₹35 lakh in cash. Then she will be required to explain her three years’ income along with penalties and each and every proof of income.

But if she had filed ITR regularly for four years, then she might not have received a notice just for purchasing a car worth ₹35 lakh.

Cons (Drawbacks) of Filing 3 ITRs at a Time

1. Late fee and additional tax burden

Yes, you heard it right. The late fee for filing ITR ranges from ₹1,000 to ₹5,000, and if you have any tax liability, then you will also be required to pay interest on the tax. But still, it is better to pay it voluntarily rather than later after receiving a notice.

2. Not Eligible for Refund

Yes, you heard it right. If TDS has been deducted and you were eligible for a refund, but you did not file your ITR on time, then you will not be eligible for a refund even though you were entitled to it.

Example: Let’s say, in the above example, Vaidehi used to file her ITR on time for the last five years. This year, she bought a car worth ₹35 lakh, on which she paid TCS of ₹35,000 and was eligible for a refund. However, she did not file her ITR for this year on time. If she goes for filing her ITR after the due date, then although she can file her ITR, she will not be eligible for the refund.

When Is Filing 3 ITRs at a Time Advisable?

When applying for loans or visas
When past income is already reflected in AIS
When non-filing may attract a departmental notice
When the taxpayer wants a clean compliance record

When It May Not Be Ideal

When income is very small and no future financial need exists
When the tax cost outweighs the benefits
When documentation is unreliable or risky

Conclusion

Filing three ITRs at a time can be a smart compliance move, but it should never be done blindly. A cost–benefit analysis and proper planning are essential to ensure that compliance today does not create problems tomorrow.