An encounter with the Income Tax Department is usually fraught with stress to say the least.
But hearing from the IT department need not always be a bad thing.
Sometimes, you might be pleasantly surprised with news of some extra cash (with late fees) being refunded to you!
A. First and foremost.keep calm and read the communication. you received end to end. Work around the legalese and understand what exactly are they trying to tell you.
B. Check the basics
C. Figure out the discrepancy
The new intimation format has 2 columns. Heres what it looks like:
If a particular row shows different amounts in these two columns, that is the source of your discrepancy.
1. TDS Amount Error
The most common issue with returns filed is often a mismatch in the TDS amounts. Sometimes your employer or deductor may have delayed or made a mistake filing their TDS returns.
If that is the problem with your return too, request your employer to revise the TDS amount credited to you.
2. Discrepancy in Return Filed by you
If the discrepancy is with the amounts declared by you in the returns you filed, try to understand the difference.
Differences may arise because:
Remember, these notices are generated automatically by the Income Tax Departments software.
Sometimes you may have filed everything correctly to the best of your knowledge, but still may have received a notice. Its always good to have an expert look at your notice.
Sometimes the IT department would like to review certain documentation based on which your returns were filed. In case of such a request, furnish the said documents immediately.
4. Tax Returns Not Filed
In case the notice is to remind you that you have not filed your tax returns yet, do so without any delay. The IT department can remind you about unfiled returns for the previous 6 assessment years.
Delays in tax filing can sometimes lead to a penalty of up to Rs.5000 per year. If there are taxes unpaid in such cases of delayed filing, the asses is charged 1% interest per month from the due date.
If you are not required by law to file a tax return, then reply to the IT department clarifying this fact.
5. Investments in the name of spouse
Many individuals resort to purchasing assets in the name of their spouse, children or other close family members in the hope of evading taxes. Assets in this case refer to any kind of investment like land, buildings, fixed deposits, mutual funds, shares, debentures etc.
Lets say you bought mutual funds in your wife name. As per section 64 of the Income Tax Act, any income you generate out of these mutual funds is still considered your income and YOU will be taxed for it.
You need to ensure that you declare such income at the time of filing your return, else you will attract attention from the taxman and receive a notice for the same.
6. High Value Transactions
High value transactions need to be updated to the Income Tax department by the entity with which you carry out such a transaction. This is in order to ensure taxes are levied as required on each of these transactions in a timely manner. Failure to do so is an invitation for a tax notice.
What qualifies as a high value transaction?
7. Non-disclosure of assets for wealth tax
If you own assets whose net value is over Rs.30 Lakhs, you are liable to pay wealth tax at the rate of 1% of the amount that is above the Rs.30 Lakhs limit. If you do disclose such assets that you own or do not pay taxes on them, there is a good chance that you might receive an IT notice.
Assets can include anything from land, second homes, cars, yachts, gold jewellery, antiques, art etc. If you are unsure about the exact value of the assets you own, you can approach government approved valuers for this purpose.
8. Random Scrutiny
To enforce tax compliance, the IT department has started randomly scrutinizing returns under section 143 (3). If you receive such a scrutiny notice, donot panic. Just follow these simple steps:
9. Still unsure?
We admit, sometimes even the best of us have trouble understanding the ins and outs of taxation. If you still have queries regarding an IT notice you received or are unsure about the next steps to be taken, feel free to consult the experts at CountMagic.
Never ignore a notice
Ignoring a notice from the IT department can prove to be expensive. Fines are usually imposed on assessees who do not respond to IT notices these can be as high as Rs.10,000!
Not sure what to do? Let the experts at CountMagic help you out.
Contact the Experts at CountMagic.