Importance of filing Income Tax returns
Last week our business development manager met a client at a network meeting.
He is a computer engineer who works with a software giant in Chennai. While talking to him she casually asked her if he had filed his IT returns this year since he had started earning only last year. She was a little surprised when he asked whether it is mandatory. When she told him it certainly is mandatory, he gave her a bigger shock by saying his income was pretty less and the Government may not really find out if he did not file his returns. More so his salary was paid after deduction of tax at source which made him think he did not have to file returns as the tax was already paid.
Many of us are under the impression that our tax liability is very less and there is one in a million chance that we might get caught by the Income Tax Authorities (ITA). Some of us are ignorant enough to think that the Government is not going to lose much if we do not pay taxes because there are other people who make crores of money and they are the ones who usually come under scrutiny of the ITA. We also think we can save money by not paying our taxes or by not declaring some of our sources of income. Trust us, if you are coming under this class of people you are making a big mistake.
The IT authorities use a computer-aided scrutiny system (CASS) to detect any evasion of tax. They can issue a notice to you anytime within one year from the month of you filing your returns. Either you or your authorized representative will be required to appear in front of the ITA. It is a lot more painful and time consuming than it looks like.
Moreover if you are found to have evaded tax, that is if ITA can prove that you have willfully failed to declare any source of income, you will be required to pay a heavy penalty. There is no point repenting at that time.
Here is a little insight on IT returns
- Form No.16: You can get this from your employer and it has details of your salary and tax deducted at source (TDS).
- Form No.16 A: You can get this from people who have made payments to you after deducting tax at source during the year.
- Bank statements
- Proof of deductions claimed: For example you may have contributed to a Public Provident fund or you may have paid a life insurance premium, etc.
- Documents relating to investments made by you: If it is investment in property you can claim exemptions on your capital gains. Also you need to have your loan documents intact if you have availed a loan for the purpose of investment. Details of investment in shares, if any, should also be maintained so that setting off of losses can be done
For Financial year 2010-2011 income tax returns need to be filed if the gross income (that is income before deductions) exceeds basic exemption limits as given below:
For resident individuals: If gross income exceeds Rs. 1,60,000.00
For resident women: If gross income exceeds Rs. 1,90,000.00
For senior citizens: If gross income exceeds Rs. 2,40,000.00
Therefore in order to avoid coming under scrutiny and to live a peaceful life please make sure you pay your taxes and file your tax returns on time. We all can use our time more productively rather than spending time on attending income tax hearings for evasion of tax or non-filing of returns.
For any assistance relating to filing of tax returns e-mail us at email@example.com