Facebook Fan

           
Blog : Elevate Your Life Email Linked In | 6,500+ Followers Whats App | 800+ Subscribers Facebook Fan Page | 800+ fans YouTube | 600+ subscribers | 10,000+ hits Twitter | 900+ followers | 6,000+ tweets GoodReads | 480+ reviews | 4.3 avg rating Quora | 1700+ followers | 700+ answers Pinterest | 50+ followers | 350+ pins

'ELEVATE' Monthly Newsletter LAUNCHED on 1st Feb 2023
Subscribe NowMore about ELEVATE
BLOG SUBSCRIPTION:
Google Feed Burner has discontinued its email subscription services
You can subscribe to our Whats App Broadcast services by sending a msg 'SUBSCRIBE' at '+91 9871133619'

Manoj Arora    About Me
Author Mission    My Mission
Credentials & Awards   Awards & Credentials

Amazon Author Page   Visit Author's Page at Amazon
Flipkart Author Page   Visit Author's Page at Flipkart

Thursday, May 28, 2015

8 Mistakes that could serve you a tax notice

Income Tax authorities are on an overdrive. There are collection and compliance targets that they need to meet. Tax authorities now have integrated databases on taxpayers and can track almost all financial transactions of an individual. You are more likely to get an IT notice now, than ever before. Find out some of the key reasons why you could be served an IT notice, and take pro-active steps to avoid them...Read on..

Some people do argue that when they have not done anything illegal, why should they be worried about any such notice from IT department. They are ready to face the tax authorities. To all such wise men and women, let me tell you that Indian Tax laws are one of the most complicated in the world, and even the best and hard core professionals do not understand them fully. 
Once you get a notice, there is a significantly high chance that you would be caught off guard trying to defend a loop hole in your financial transactions, which you missed tracking, out of sheer ignorance. And as we all know, Ignorance of law can never be an excuse.
So, the best is to avoid any such notice. Of course, we still got to be doing the right thing always, to the best of our knowledge and abilities.

Here are the top 8 reasons, which once addressed, drastically reduces your chances of getting an Income Tax notice.

(1) You don't mention your PAN number or quote an incorrect one
  • For all financial transactions, you are required to quote your PAN number. 
  • If you do not submit your PAN number and make an investment, then the income you get from the investment will be subject to a higher TDS (Tax Deduction at Source) of 20% instead of the usual 10%.
  • If you fill the PAN number incorrectly, you could potentially be asked to pay a penalty of INR 10,000.

(2) There is a mismatch in your income, expenses and investments
  • All high value transactions you make with financial services firms and merchant establishments are reported to the CBDT Central Board of Direct Taxation). 
  • The income tax department gets all the information of your high value transactions through your PAN card details. 
  • The Computer Aided Scrutiny Selection (CASS) matches the information of your high value transactions (spending/investments) with the returns you have filed and any mismatch results in you getting an income tax notice.
  • Examples of high value transactions are: (a) Cash deposits in a bank of Rs 10 lakh or more in a year. (b) Credit card purchases of Rs 2 lakh or more, (c) Mutual fund investments for Rs 2 lakh or more. (d) Purchase of bonds and debentures of Rs 5 lakh or more in a year. (e) Sale or purchase of property worth Rs 30 lakh or more

(3) You don't file returns if your income is above the basic tax limit
  • If your gross taxable salary (Salary available to tax) before the deductions under any Section is above INR 2.5 Lakhs, then it is compulsory for you to file income tax returns. So, if your annual income is Rs. 3.5 Lacs and you invested Rs. 1.2 Lacs under Section 80C, then your taxable income would be Rs. 2.3 L which would entail Zero Tax, but since your annual income was above Rs. 2.5 LAcs, you are still required to file your income tax returns.
  • If you do not file your returns you are liable to pay a penalty up to 300% of the outstanding tax.

(4) You don't file your returns before the due date
  • You can file your income tax return till the end of the assessment year if you have no tax dues pending (You have paid all your taxes). The tax returns for the FY(Financial Year) 2014-15 can be filed before 31st March 2016 (AY 2015-16) without any penalty if you have paid your taxes.
  • If you have taxes unpaid and you file your returns after the deadline for tax filing in the year (normally it is 30th June for the previous financial year), then you are liable to pay a penalty of INR 5,000. In such a case, you cannot file a revised return or carry forward any losses you suffer (say capital losses) if you file your taxes after the due date.

(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 per cent of the tax evaded.


(6) You don't declare interest you earn on your deposits and savings
  • The interest you earn on bonds, fixed deposits, recurring deposits and savings accounts is taxable and you have to mention it in your tax returns. The interest you earn up to INR 10,000 on your savings bank account is tax free (Section 80TTA) but needs to be included in your total income. The PPF interest income is tax free but needs to be included in the exempt income.
  • Make sure that you check your Form 26AS. Form 26AS has details of the tax paid by an individual during a financial year. You can easily access your Form 26AS online. Some banks also provide this facility to their Net banking customers. Before you file your return, check whether your Form 26AS has correctly credited the tax deducted on your behalf.
  • If your bank, bond issuer or employer has deducted TDS, make sure it is mentioned in your Form 26AS. Also, check whether all the investments with TDS have been duly mentioned in the tax return. Any mismatch is very likely lead to a notice from the department.


(7) Avoiding TDS by misusing Forms 15G and 15H
  • If the interest income on bank deposits exceeds Rs 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 TDS, you can get a notice from the tax department. 
  • Submitting a wrong declaration can invite a penalty of Rs 10,000. 
  • Splitting the deposits in different banks or bank branches to avoid TDS will not help as the tracking is now done through your PAN number.


(8) You don't respond to the notice from the income 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 that may not be beneficial for you.
  • If you don't comply with the tax notice you could potentially pay a penalty of INR 10,000. This is apart from the tax and the interest penalty.

Get going. Keep it simple. Avoiding an IT notice can serve you pretty well. Taking these simple precautions today will help you avoid long term hassles.



Cheers

Manoj Arora
Elevate Your Life

No comments:

Post a Comment