The government extended the deadline for filing income tax returns for the FY20 assessment year by individuals and certain non-corporate assessees by one month to 31 August. However, haste makes waste. Now that the date has been extended, you have time on your side. Before actually filing the return, keep the following in mind.
1. Choose the correct ITR Form. If you file your ITR using wrong form, it will be termed as a defective return and you will be required to file it again.
2. Check your TDS certificates --- Form 16 for salaried income and Form 16A for incomes under other heads --- received from the deductors with your Form 26AS which is available on the income tax department’s TRACES website. This is your TDS passbook giving all the details of the tax that has been deducted from your income and deposited against your PAN. Get the anomalies, if any, rectified from the persons from whom you have received the related incomes.
3. Keep track of certificates on which you have claimed TDS and those accepted by the income tax department, especially those received at the end of the year.
4. Add interest, if any, payable under Sections 234A, 234B and 234C. You may need professional assistance for this.
5. Check your totals carefully unless you are using a software for filing. Since the returns are now assessed digitally, even a small mistake may result in you getting a notice which is also sent digitally.
6. File your returns digitally. Only senior citizens are allowed paper format.
7. Verify the return. The last step of ITR filing process is verification. Without carrying out proper verification, the return will be deemed as not filed. There are 6 ways to verify your ITR. Of this, five are electronic methods and one is physical verification. If you want to verify your tax-return electronically, you will not be required to send any documents to the tax department. However, if you wish to verify your return physically, then you will be required to send a duly signed copy of ITR-V/Acknowledgement to 'CPC, Post Box no. 1, Post Box no. 1, Electronic City Post Office, Bangalore- 560100, Karnataka, India.' Remember after you file your ITR, you have 120 days to verify it. To reiterate, if you do not verify your ITR, then it will be deemed as you have not file ITR. In case you forget to verify your ITR before the deadline, you can file a request to your assessing officer.
8. E-verification acknowledgement: Last but not the least, if you verify your ITR using an electronic method, then you will immediately receive the confirmation from the tax department regarding verification of your ITR. If you have sent ITR-V via post to the I-T department, they will send you an email confirming that your ITR-V has been received by the I-T department, i.e., your return stands verified. The email will be sent to the email address you have registered in your e-filing account on the on the income tax department's e-filing website.
9. IT department will process return after verification
After the return is verified, either via e-verification or physically, the income tax department will start processing your tax return to ensure that all the details filled by you are correct as per the Income Tax Act and also cross-check the details filled by you with other data available with it. Once the return is processed, the I-T department communicates the same to you via email to your registered email ID.
10. In case any discrepancies are found, they may ask you to explain further or correct the mistakes made while filing the original ITR.
It is a well documented statistic that less than 3% of our population actually pay taxes. The authorities have been slowly and steadily putting systems and procedures in place to apprehend tax evaders. If the evasion is over Rs 3,000 the department may initiate prosecution and the jail term can be three months to two years and if it exceeds Rs 25 lakh the period may be up to seven years. The penalty for under-reporting the penalty can be up to 50% of the tax due.
So not filing the returns, for evading tax is a huge mistake.
Filing returns have several advantages. It serves as a proof of income and address --- mandatory when you apply for a housing or vehicular loan. Most embassies & consulates require copies of your tax returns for the past couple of years at the time of the visa application.
Another mistake an assessee commits is to file the returns late. Note that ---
1. Sec. 234F slaps a penalty of Rs 5,000 if returns are filed after the stipulated due date but before 31st December and Rs 10,000. for returns filed thereafter. A small solace --- If the total income does not exceed Rs 5 lakh, the maximum penalty will be Rs 1,000.
2. The amount of interests payable u/ss 234A for late filing, 234B for advance tax being less than 90%, 234C for shortfall of first three instalments of advance tax, etc., gets inflated. Longer the delay, higher is the interest payable.
3. Late filing robs you from all the carry forward losses, if any, for the last 8 years which you could have set off against your future income.
4. Refunds due, if any, get delayed. Realise that the rates and thresholds of income tax are not the same as those of TDS. You have to file the returns even if the TDS is higher than the tax due from you.
The authors, AN Shanbhag and Sandeep Shanbhag, are tax consultants and can be reached at email@example.com