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

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...
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