“There is no worse tyranny than to
force a man to pay for what he does not want merely because you think
it would be good for him.” This quote, perhaps, best summarizes
what many taxpayers think about doing their income
tax returns. For why else would so many individual ITR filers use
immature tactics such as concealment of income to lower their tax
assessment? The quote is taken from Robert A Heinlein’s 1966
science fiction novel, ‘The Moon is a Harsh Mistress’, about an
off-planet outpost’s revolution against earth and a character
express his anguish thus.
Tax laws have traditionally been
complex and cumbersome but things are changing for the better.
Ignorance of compliance norms could also be a key reason why people
filing their own ITRs make such mistakes and end up receiving tax
notices.
A reasonable checklist when doing your
taxes is given below:
- Have personal documents such as PAN, AADHAAR and bank details ready.
- Use e-filing on online sites which auto-read Form 16 data into the income tax authority portal to minimise data input errors.
- Count and write down all your sources of income. Determine your annual income.
- Once you’re done with your tax form filling, make sure to either send the acknowledgement ITR-V form to the CPC, Bangalore via post or use a digitised signature on your tax portal account.
At a recent conference for central and
state tax officials, income tax data was proposed to be analysed by
using Big-Data analytics. This means that various huge databases
across multiple agencies and institutions can be compared to identify
tax discrepancies and violators. So, if most people belief that a
certain method for evading taxes was safe because you didn’t get a
notice last time, you may be in for a shock.
False Rent Receipts to claim HRA exemption
Consider for example, HRA
exemption claims by producing a false HRA
rent receipt signed by a relative or spouse. The Income Tax
Appellate Tribunal decided that tax assessing officers will now have
the power to demand proof of tenancy from the person filing his
returns. The proof may include registered rent agreements, letter to
a housing society identifying such tenant, water and/or electricity
bills etc. Even though, a tax official may decide not to investigate
a particular case, a person found in breach of his declaration can be
punished, by law, with a jail term extending from 3 months to 2
years. Technology may help identify violators by tagging discrepant
behaviour.
A better option, according to experts
at All India ITR, a tax solutions firm, may be to actually pay a
small amount as rent to the relative (but not spouse) with complete
contractual documentation, rent receipts and cost break-ups. This
will help you save at least some amount on your tax liability via the
exemption on HRA.
Interest on Term Deposits with Banks is Taxable
Most individual income tax payers seem
to be unaware that interest income on all but a few schemes are
taxable. The exemptions being:
- Savings Bank Accounts if the interest income remains below Rupees 10, 000/-
- Sukanya Samriddhi Yojana.
- Tax Saving Bonds
- Public Provident Funds, Employee Provident Funds
- ULIP schemes
Banks will automatically deduct TDS if
your interest income from any account exceeds the exemption limit or
as in the case of Fixed Deposits, is fully taxable. Form 26AS
generated by banks is assessed by tax authorities to determine income
tax return discrepancies.
Can Multiple Bank Accounts help Save Tax?
Another mistake is spreading your
accounts over multiple banks in the hopes that interest income would
not be added up. Your PAN and AADHAAR are mandatorily linked with
your bank account and it can easily be identified which accounts are
linked with which PAN identifier.
Form 15G or 15H used to request banks
not to deduct TDS, can be compared with 26AS to unearth concealment
and perjury.
When in doubt about your income
tax return filing fields, it is always best consult a tax expert,
says Vikas Dahiy, CEO and founder of All India ITR.
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