Skip to main content

Income tax returns filling myths

Many investors seem to be under the impression that having a permanent account number (PAN) makes it mandatory to file the tax return. The issue has especially come up ever since PAN was made compulsory for investing in mutual funds. There are many who feel that now that they have been allotted a PAN, return filing would also be a must, no matter that they don't have any taxable income.

On the other hand, there are those, especially the salaried class, who feel that as long as their monthly take home salary has been subject to TDS, they have no further obligation as far as the taxman is concerned. In other words, they feel that since their income is already subjected to tax, there is no further action needed on their part.

Both are misconceptions. Though a taxpayer needs to have a PAN to file the tax return, the reverse is not true. And similarly, even though TDS has been deducted on one's income, filing a tax return could be obligatory.

Basically, the rule is that if one earns an income above the basic exemption limit, it is obligatory on such a person to file his or her tax return.

For FY 09-10, the basic exemption limits are Rs 1.60 lakh, Rs 1.90 lakh and Rs 2.40 lakh for men, ladies and senior citizens, respectively. So, if your income is lower, irrespective of whether you have been allotted a PAN or not, you need not file a tax return. And if your income is higher, then irrespective of the tax deducted at source, you have to file your tax return. Note that income in this context is your gross income i.e. before claiming any deduction.

Belated return
As we all know, the last date for filing the tax return is July 31. So what happens, if for any reason, you are unable to file your return in time? Even then, there is no cause to worry as such — the law allows you to file a belated return at any time before the end of one year from the end of the relevant assessment year. In other words, if you file a return after July 31, it will be termed as a belated return and the same can be submitted anytime up to March 31, 2012.

In terms of repercussions, an interest of 1% per month will be levied on any tax due. Also, the tax official has the option of imposing a penalty of Rs 5,000 on account of the late submission. So say you are a salaried employee who has not filed his or her return in time, however, the tax due from you has already been deducted at source in the usual course. In this case, the maximum downside even for a late filing would be the Rs 5,000 penalty amount. Since the tax due from you has already been paid (by way of the TDS), there would be no liability on account of interest. Remember, interest is levied only if you owe any tax to the government.

However, there is yet another drawback of not filing the tax return in time. If you have any business loss or capital loss (short-term or long-term), the same cannot be carried forward for set-off against future income, if the tax return is not filed in time.

So all in all, it is always advisable to submit your tax return in time — however, if you cannot do so due to unavoidable circumstances, then the consequences are as detailed above.

Revised return
There is yet another concept known as 'revised return'. As the name suggests, if you were to discover any omission or wrong treatment of any income or deduction or a wrong statement in your originally filed return, then within one year from the end of the relevant assessment year, you may file a revised return.

Therefore, just like in the case of a belated return, you have time till March 31, 2012 for filing the revised return.

In terms of a real life example, DU Desai (name changed upon request) had originally filed his return for FY 08-09 well within the time limit of July 31, 2009. However, later on, somewhere around December 2009, while making his advance tax calculations, he realised that he had erroneously claimed an amount of Rs 2 lakh as tax exempt. What he thought was the maturity amount from an equity mutual fund was in fact, interest income from an old bond investment. After paying the requisite amount of tax with interest due thereon, Desai went on to file a revised return correcting the error in the previously filed return.

Again, note that a revised return can be filed if and only if the original return has been submitted in time.

To sum

Whether you pay in time or belated, if you owe it to the government, you have to pay the tax. There is no escaping this law. Ironical, especially when you consider the fact that a fine is a tax you pay for doing something wrong whereas a tax is a fine you pay for doing something right.

 

Popular posts from this blog

How to Decide your asset allocation with Mutual Funds?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) How to Decide your asset allocation ? The funds that base their equity allocation on market valuation have given stable returns in the past. Pick these if you are a buy-and-forget investor. Small investors are often victims of greed and fear. When markets are rising, greed makes the small investor increase his exposure to stocks. And when stocks crash to low levels, fear makes him redeem his investments. But there are a few funds that avoid this risk by continuously changing the asset mix of their portfolios. Their allocation to equity is not based on the fund manager's outlook for the market, but on its valuations. Our top pick is the Franklin Templeton Dynamic PE Ratio Fund, a fund of funds that divides its corpus between two schemes from the same fund house-the...

Mirae Asset Healthcare Fund

Best SIP Funds to Invest Online   Mirae Asset Global Investments (India) has launched Mirae Asset Healthcare Fund. The NFO of the fund will be open from June 11, 2018 to June 25, 2018. Mirae Asset Healthcare Fund is an open-ended equity scheme investing in healthcare and allied sectors. The scheme will invest in Indian equities and equity related securities of companies that are likely to benefit either directly or indirectly from healthcare and allied sectors. The investment strategy of this scheme aims to maintain a concentrated portfolio of 30-40 stocks. Healthcare is a broad secular theme that includes pharma, hospitals, diagnostics, insurance and other allied sectors. The fund will have the flexibility to invest across markets capitalization and style in selecting investment opportunities within this theme. Neelesh Surana and Vrijesh Kasera will manage this fund. In a press release, Swarup Mohanty, CEO, Mirae Asset Global Inves...

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...

Equity Investing Strategy - Value to patient investors

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) Beaten - down sectors = greater The markets are priced to optimum; steady earners are priced at premiums. But significant money is unlikely to be made through steady earners The equity market has topped 20,500 and is close to its alltime high, an enormous increase in value considering that just a few months ago naysayers were predicting a downslide. Three months ago, the Sensex was around 18,500 levels, and experts predicted the worst. Revenue and profit growth figures of the latest quarter have cheered the equity market. Revenue growth came in double digits while profit increased in line with analyst estimates. Now the equity market is factoring in a growth rate of approximately 14 per cent in the current fiscal – with consensus ...

Different types Joint Savings Bank Account

A joint savings account comes with operating options such as either or survivor, anyone or survivor, former or survivor and latter or survivor Are you looking to open a joint savings account with your spouse, parents, siblings or children? All banks that offer savings accounts, allow you to open a joint account. According to the Reserve Bank of India (RBI), there is no restriction on the number of account holders who can jointly share one account. However, there are banks that restrict the number of joint account holders to four. Further, the way you operate the joint savings account depends on the agreement that you have signed with the bank. Different types of joint accounts A joint savings account comes with operating options such as either or survivor, anyone or survivor, former or survivor and latter or survivor. These terms decide how you can operate the account and what happens to the money in case of death of an account holder. Either or survivor:   If you select this option, ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now