KNOW SOME COMMON REASONS; WHY
TAX AUTHORITIES SEND YOU NOTICES
The Income Tax Department has always been a nightmare between
business owners for long. Although the taxpayers file their returns within due
time and paying all taxes they still have chances to receive Income Tax Notices
that further give rise to many hassles & mental agony among the tax payers.
Recently the IT Department has launched a drive to ensure
greater tax compliance; thousands of taxpayers have been served notices after
discrepancies were noted in their tax returns or their TDS details during last
three months. This sudden rise in the number of tax notices is not because
people have stopped paying taxes or filing their returns. It’s just because the
tax authorities now have an integrated database on taxpayers and tracking
various financial transactions about all pan holders. Here are some common
mistakes that give a chance to IT Department to send you an IT Notice. Be
careful for the following things to avoid such communication of IT Department.
1. Not filing returns if income is above 2.5 lakh
If your gross taxable
income before deduction under any section is above 2.5lakh, it is mandatory for you
to file your return. If you don’t file it, you can be slapped with a penalty of
up to 300% of the outstanding tax. Even if there is no tax liability, you have
to file the return if the gross income before various deductions is more than
the basic exemption limit.
2. Not filing return by the due date
All company assesse &
businesses required to get their accounts audited, all such cases are required
to file their IT returns by 30th September each year while all other
filers have 31st July as their last date. You can file your income
tax return till the end of the assessment year if there is no tax due. For
example, the tax return for 2012-13 can be filed till 31 March 2014 without
incurring any penalty if the tax has been paid. But if some tax remains unpaid,
filing your return after the deadline could lead to a penalty of 5,000. Also,
you are not allowed to carry forward losses or revise the return if you file
after the due date.
3. Ignoring Form 26AS before ITR filing
The Form 26AS is a gist of
all the taxes paid by an individual during a financial year or credited to his
account through TDS deducted by various sources. You can easily access your
Form 26AS online. Some banks also provide this facility to their Net banking
customers. Any income shown in your Form 26AS but not shown in your return or
any tax credit being claimed in your ITR but not being shown in your 26AS
statement; is an invitation to IT notice from department. Therefore make
yourself double sure before filing your IT Return that all the Information
given are correct.
4. Not mentioning AIR Details
The IT Return form requires every
assessee to fill detail about 8 big cash/ bank transactions; to which most of
the assessee take very lightly. This column requires information like cash
deposit into saving banks, property purchases, Investments in units, shares,
debentures, etc. Such avoidance may become a call to communication from income
tax department; therefore you must be careful in writing AIR details in your IT
returns.
5. Not declaring the previous employer’s income
This is a common problem
and was easily missed by the tax authorities in the past. However, now that the
tax database has been integrated, don’t think you can ignore your income from a
previous job. If your employer deducted TDS on your income, the details would
be in your Form 26AS, and the CASS will immediately flag this discrepancy. You
can be levied a penalty of up to 300% of the tax evaded.
6. Not declaring interest on deposits and savings
The interest earned on bonds, fixed
deposits, recurring deposits and savings accounts is taxable and should be
mentioned in your tax return. Up to 10,000 earned on your savings bank account
is tax-free, but it still needs to be included in your total income for the
year. Likewise, the PPF interest income is tax-free, but should be included in
the exempt income. Interest on savings account is exempt up to 10,000 for the
assessment year 2013-14; while interest from post office savings is exempt up
to 4,000, or 8,000 for joint accounts.
7. Mismatch in income and expenses & investments
Financial services firms,
registration authorities and merchant establishments are supposed to report
certain high-value transactions to the CBDT. The Income Tax Department gets all
information on the basis of your PAN. The CASS matches this information with
the returns filed by the taxpayer and promptly issue a notice if there is a
mismatch in the income you have declared and your investments and spending.
8. Avoiding TDS by misusing Forms 15G and 15H
If the interest income on
bank deposits exceeds 10,000 a year, the bank deducts TDS. You can avoid TDS by
submitting Form 15G or 15H if you are not liable to tax. However, if you are
trying to avoid tax liability, you can get a notice from the tax department.
Submitting a wrong declaration can invite a penalty of 10,000. Splitting the
deposits in different banks or branches to avoid TDS won't help as the PAN
gives you away.
9. Not mentioning PAN or quoting incorrect PAN
PAN is now mandatory for
high-value transactions. If you do not submit it while making an investment or
taking up a job, your income will be subjected to a higher TDS of 20%, instead
of 10%. If the PAN is incorrect, you could even be slapped with a penalty of up
to 10,000. The bigger problem of an incorrect PAN is that the TDS will not be
credited to your account.
10. Not responding to notice from tax department
Don’t ignore the messages
and notices from the tax department. If you do not respond, the interest and
penalty keeps on increasing in case of any pending tax liability and the Income
Tax Department will take a final decision; one sided & that may not be
beneficial for you.
CA Jai Sethi
Jai@neusourceindia.com
Jai@neusourceindia.com
