Five tax mis­takes to avoid in 2014

The Financial Express - - PERSONAL FINANCE -

EV­ERY new year comes with many res­o­lu­tions, but th­ese res­o­lu­tions keep fad­ing with each pass­ing day. This holds true for al­most each one of us re­gard­less of the se­ri­ous con­se­quences on our health and wealth. One very im­por­tant res­o­lu­tion is com­pli­ance with in­come tax to avoid tax notices and penal­ties. Tax au­thor­i­ties, nowa­days, can track all fi­nan­cial trans­ac­tions with their in­te­grated data­base. So, keep­ing in mind the fol­low­ing tips can help you save your­self from the pry­ing eyes of the in­come tax depart­ment (ITD).

Don’t for­get to file IT re­turns

It is manda­tory for ev­ery in­di­vid­ual, those who earn above R2 lakh, to ei­ther efile or man­u­ally file their in­come tax re­turns. For those with in­come above R5 lakh, it is manda­tory to efile the re­turn. The true ob­jec­tive of ITD be­hind tax notices is to keep an eye on the non-fil­ers of tax re­turns and tax evaders. The depart­ment scru­ti­nises cases through Com­puter-As­sisted Scru­tiny Sys­tem (CASS). This sys­tem matches in­for­ma­tion re- ceived on the ba­sis of your PAN with the I-T re­turns filed by you. If any mis­match is found in the in­come that you have de­clared and your in­vest­ment and ex­pen­di­ture, ITD will promptly is­sue a no­tice to you. The chances of get­ting a no­tice rise tremen­dously if you don’t fur­nish your ITR at all and there are trans­ac­tions re­ported against your PAN.

Never sub­mit wrong dec­la­ra­tion in Form 15G/15H to avoid TDS

Gen­er­ally, peo­ple split their de­posits in dif­fer­ent banks or branches to avoid TDS, but this won’t help much. Firstly, check whether you are el­i­gi­ble to sub­mit 15 G/H or not. As per laws if the in­come from in­ter­est on bank de­posits ex­ceeds R10,000 a year, the bank deducts TDS. Those who have tried to avoid TDS by sub­mit­ting Form 15G or 15H in spite of hav­ing tax­able in­come are be­ing caught eas­ily through their PAN. A wrong dec­la­ra­tion can cost you R10,000.

One very im­por­tant new year res­o­lu­tion is com­pli­ance with in­come tax to avoid tax notices and penal­ties

Don’t hide in­come nei­ther ex­empt nor of small value

It has been no­ticed that ma­jor­ity of tax pay­ers are not declar­ing sav­ing bank in­ter­est as well as ex­empt in­come. The ITD can slap you with tax and penalty up to 300% of tax evaded any­time in next 8 years. The other com­mon mis­take is not declar­ing FD in­ter­est where TDS has al­ready been de­ducted by bank. In this case if the to­tal in­come is above R5 lakh, the tax slab would be 20%. Hence, ad­di­tional 10% tax needs to be de­posited on FD in­ter­est in­come. Sim­i­larly, any com­mis­sion, rental in­come on prop­erty, amount re­ceived from a non rel­a­tive above R50,000 dur­ing the fis­cal, gain/loss on sale of cap­i­tal as­sets i.e. prop­erty, shares, gold, paint­ings, etc, is to be dis­closed in the ITR.

Match re­turns data with Form 26AS

Form 26AS re­flects all your in­come and tax cred­its. Al­ways match your re­turn data with Form 26AS be­fore fil­ing the re­turn. Nu­mer­ous tax de­mand notices are be­ing sent to tax­pay­ers, be­cause the TDS be­ing claimed in the in­come tax re­turn is not re­flected in form 26 AS. This could be due to sub­mit­ting wrong PAN to em­ployer/de­duc­tor or a case of typo er­ror by em­ployer or de­lay in de­posit­ing the TDS amount by the em­ployer.

In­vest in tax sav­ing op­tions af­ter know­ing tax laws

Don’t in­vest in tax sav­ing op­tions with­out know­ing cur­rent tax laws. Ev­ery year there are changes in tax laws and ter ms and con­di­tions for el­i­gi­bil­ity. PAN of the land­lord is now manda­tory for rent pay­ment of more than R1 lakh per an­num. Not giv­ing your PAN to the em­ployer leads to higher TDS of 20% of salary, even if you fall in lower tax bracket. Re­verse mort­gage has been in­tro­duced for the ben­e­fit of se­nior cit­i­zens. How­ever, it is not be­ing used as an in­stru­ment of tax free re­tire­ment plan­ning.


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