Written by Renu Yadav | Last Updated: December 22, 2015 09:06 (IST) | NDTV Profit
Receiving an income tax notice can be scary for most people. From not filing returns to hiding interest income, the reasons can vary for attracting a notice. Avoid these most common mistakes if you don’t want to get an income tax notice.
1) Not filing income tax returns
According to income tax law, if your gross income (without any deductions) is above the exempted limit of Rs 2.5 lakh in case of individuals, Rs 3 lakh for senior citizens (60-80 years of age) and Rs 5 lakh for super seniors (above 80 years), you are liable to file a tax return. Also, irrespective of the fact that your employer has deducted the tax at source (TDS) or not, you have to file an income tax return. Many people also believe that since they don’t have a tax refund to claim, they don’t need to file return. But that’s a misconception.
According to Preeti Khurana, chief editor of Cleartax.in, “If you are a resident Indian and you own a foreign asset or are a signing authority in a foreign bank account, you have to file an income tax return irrespective of your income.” If you fail to do so, you may get a notice from the income tax department, she added.
2) TDS errors
If there is mismatch between the TDS deposited by your employer and the income tax return filed by you, you may get an income tax notice. You should always check your tax credit statement (Form 26AS) online before filing the return. If a wrong TDS has been credited to your account or it has been credited to a wrong PAN, despite it being deducted from your salary, you can come under scrutiny.
3) Hiding interest income
Many people knowingly or unknowingly don’t include the interest income from their saving account, fixed deposits and recurring deposits in their income tax returns. The interest from saving account up to Rs 10,000 is tax deductible under Section 80 TTA while interest on fixed deposits and recurring deposits is fully taxable. In case of fixed deposits and recurring deposit, a TDS will be deducted in case the interest income exceeds Rs 10,000 in a financial year. But whether the interest is taxable or not, you have to disclose all your interest income in your tax return. So reveal the interest income in your return and then avail the deduction if any. Not doing so can result in a tax notice.
4) Mismatch or concealment of income
If your actual income, expenditure or investments differ from the one declared in your income tax return, you can get an income tax notice under Section 143(3)/143(7). You would be asked to provide clarifications and documents for re-calculation of your income.
“Notice is issued when tax authorities are of the opinion that you have concealed a part of your income while filing your return of income. Penalty for concealment of income can be up to a maximum of 300 per cent of tax payable.” says Neha Malhotra, executive director of taxation at Nangia & Co.
“The tax authorities can send notices pertaining to years gone by as well. So it is advisable to preserve the tax records for eight years, but where the assessee has any asset situated outside India, he should preserve the documents for past 18 years,” she said.
5) Defective income tax return
You should be careful while filing your income tax return. If the income tax authorities find any error they can issue a notice to you under Section 139(9) and direct you to file a revised return on income after correcting the error.
Source : http://goo.gl/9F1yT1