With the use
of technology and computer systems, it has become quite easy for Income Tax
Department to identify discrepancies in records and to keep a close eye on
almost every financial transaction. Usually any communication from IT
department, especially receiving a notice from them, can send shivers down
anyone’s spine. Therefore, while filing return, one need to keep few things
in mind so as to minimize the chances of receiving notices due to small
mistakes. Any wrong details furnished might put you in trouble which shall
ultimately result in a notice either in the form of limited scrutiny or some
other communication from IT department.
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From past few
years, almost every taxpayer is receiving notices from Department. Now, it
has become important that every provision and clause of tax laws be strictly
abided in full spirit. There are few reasons due to which notices are being
issued and these reasons are very common among taxpayers. Prominent things to
note to avoid notice from Department:
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Every assesse who is liable to file
return should do the same within the due date. While filing return due care must be taken to
avoid any mistake. Details required in return should be truly and fully
disclosed. Notice shall be issued, if any default is found.
Generally, relatives transfers gifts from friends and
relatives to themselves. Gifts taken may be in cash or kind. If such gifts appear
in your account then do not forget to document the evidence for the same.
Department may ask for details and source of gifts received. If proper and
satisfactory evidence is not provided then department issues notices
regarding the same treating same as unexplained credits.
Ignorance
regarding balance between income and expense/investments may become an issue.
Many times it is found that assessee invests more than what they earn and
then they have to justify the source of funds which has been used for
investment. If balance is not properly maintained then be ready to receive
notice.
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Form 26AS is
an easy way to find out the details of TDS deposited on your behalf. You should always go through your 26AS to match the TDS with the books of
accounts. Any mismatch found may appear in the notice from department.
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Advance tax
shall be paid if the tax liability for a financial year is more than Rs.
10,000. Such tax shall be paid within the same year on the basis of self
assessment. Any assessee liable to pay advance tax shall pay it within due
date as specified. Failure to which you can get notice from department.
All income
earned are generally taxed but there are few income which are exempt from payment of tax. Assessee generally does not disclose such income while filing
their return thinking that as no tax is paid on such income it is not
necessary to disclose it. But this is a myth which needs to be cleared.
Incomes like long term capital gains tax from equity, dividends received on
equity shares of Indian companies, saving bank account interest up to Rs.
10000 etc. though exempt shall be disclosed while filing your return.
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If there is
high value transactions either for investments or spending then chances of
you getting the notice from IT Department are very high. There are few
transactions which are reported to the IT department under Annual information
Returns filed by respective companies and may attract an enquiry ranging from
simple to exhaustive by IT department. Any high value transaction should be
incurred in planned way. Examples of such transactions are:
▪ Credit card usage of more
than Rs. 2 lakhs p.a.
▪ Investing in FDs for more
than Rs. 5 lakhs
▪ Depositing more than Rs. 10
lakhs in your bank account
▪ Investing more than Rs. 2
lakhs in MFs or Rs. 1 lakh in shares
▪ Buying or selling property
over Rs. 30 lakhs
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Utmost care
shall be given in interest received from banks. Assessee believe that as banks deduct 10% TDS on the deposits interest, there is no need to pay tax on
the same by them. In such case, facts are other way round which shall
necessarily be understood to avoid notices. Though bank deducts TDS but you
are suppose to pay any additional tax depending on your income tax bracket.
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For instance, If you are 30% tax bracket and you have FD in bank
of Rs. 10 lakhs. Interest rate on the same is 10%. This means interest
received is Rs. 1,00,000. Now, the bank pays Rs. 90,000 after deducting TDS @
10% i.e. Rs. 10,000 and pay to the government. As you are in 30% tax bracket,
you actually need to pay 30% to government, which means that at the end of
the year you need to pay additional Rs 20,000. If you are not doing the same,
then you might be inviting trouble for future in form of notice.
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 refers to
any kind of investment like Land, building, fixed deposits, mutual funds etc.
It is to be
kept in mind that such investments and income accruing from them are required
to be taken in account during assessment and are required to be disclosed in
return of income.
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Apart from above mentioned reasons there are chances that your case gets
selected under random scrutiny i.e. CASA. You need to contact your assessing
officer at the time and place mentioned in the notice. At the time of meeting
you can ask for reasons for which your case has been selected for scrutiny
and he is bound to provide the reasons for the same.
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A majority of
the notices is sent in the normal course of processing returns & might be
for routine enquiry or a request for simple clarification, so there is no
need to panic.
In case of any query you can get in touch with me at mahershi@akvassociate.com.
CA MAHERSHI VIJAY
ACA, CS, B.COM
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https://www.facebook.com/akvassociates
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