“Ignorance of law is not an excuse".
Above saying is also applicable to Income Tax Act & filing of tax return. Many times a tax payer makes many mistakes while filing his tax return in the month of July.
• Non disclosure of Interest income (from FD or SB)
• Non disclosure of Short term capital gain from shares
• Non disclosure of Salary from Previous employer (when there is a Change of Job)
• Non Disclosure of Rental Income
• Non disclosure of Capital gains from sale of Property
• Wrong claim of HRA
• Wrong claim of deductions under Chapter VI
The above errors may happen out of ignorance or may be casual approach towards these sources.
But following may be the consequences of not disclosing:
◘ Additional tax liability and incidence of Interest under Sec.234A, 234B and 234C
|| Sec 234A
||1% per month of Tax payable amount from due date of filing
||1 % per month of Tax payable amount if it exceeds Rs 10,000 from due date of filing
||3% on Tax Payable amount
◘ Failure to comply with any order from the IT department may result in penalty of Rs 10,000.
◘ Concealment of Income Section 271(c) - ITO has powers to levy penalty of 300% of Tax liability other than above interest. But this provision is being used rarely.
◘ Your case may be selected for scrutiny.
◘ Since penal provisions are more tough, it is better to disclose income from all sources received during the year. Any omission unknowingly can be rectified by filing revised return by disclosing all the income and pay proper taxes thereon.
◘ Revised return can be filed any time within two years of fling the regular return, but before the assessment is completed.
◘ Similarly any deductions omitted to be claimed can be claimed by filing revised return as explained above.
You can take following steps to minimize errors in your tax returns.
○ Analyse your bank pass books and your expenditure on credit cards/cash/and cheques.
○ Keep track of your income from interest, from stock market, from sale of properties and such extraneous sources of income.
○ Keep a list of exempted income as the same is required to be disclosed even though it is not taxable.
○ Keep a list of all the transactions which is above a threshold limit which needs to be reported to the income tax department; eg: investment in MF exceeding Rs.2.00 lacs; Expenditure through Credit cards exceeding Rs.2.00lacs, Purchase/Sale of Immovable property above Rs. 30 lacs etc.,
○ It’s always better to consult your tax experts well in advance of due date of filing of tax return with following documents
○ Be very strong in filing the documents. Your documents need to be preserved atleast for a period of Six years in case of sources of Income and Expenditure and Investment proof have to be probably preserved for your life time.