Things have changed once again; the Income Tax Department has just got its act together and now has their command, a single, central database of taxpayers. The first signs of change were the thousands of taxpayers who received notices after the database drew attention to their tax returns and TDS details. The merest of discrepancies in either of the two is more than likely to draw heat from the Income Tax Department. Therefore, to avoid getting served, dear reader, here’s a list of the guaranteed ways to get a notice.
Ignoring the notice is one of the first ways to compound your problems and any such failure to react or respond to the notice will incur penalties, interest increases on pending tax liabilities and eventually, when it comes to decisions, such behaviour will not incur the favour of the department.
Skipping interest on deposits and savings is another good way to get a notice. All your savings accounts, bonds, fixed and recurring deposits must be mentioned in your returns. Even your PPF which is tax-free must be mentioned as part of your exempt income. Pay close attention to places where up to a certain amount is interest free, such as post office savings for joint accounts.
Not filing your returns in time is another method to land yourself in the proverbial soup. You can always file your income tax returns by the end of the assessment year without being penalized, but missing the deadline will cost you a fine of Rs. 5,000 and you won’t be allowed to carry forward your losses or revise your returns. Similarly, not filing your returns when your income is above Rs. 2 lakh per annum will get you into trouble. It is mandatory for those earning gross taxable income before deduction, Rs. 2 lakh or more, to file their returns; even if you have no tax liability.
Any mismatch between your income and expenses and investments will also draw the suspicion of the Income Tax Department. Reporting high value transactions to the CBDT is mandatory for merchant establishments, authorities in charge of registration and firms dealing in financial services. Since the PAN is compulsory for all high value transactions, the tax department gets all its information from it. The CASS verifies your PAN information against the returns you file and issues a notice in case of any mismatch in income, investments and spending.
The PAN info must be correct or you can be slapped with a penalty as high as up to Rs. 10,000. Incorrect PAN will not have the TDS credited to your income and not submitting your PAN at all will subject your income to a higher TDS of 20%.
Coming to filling in forms now, your Form 26AS details the amount of tax paid during a year and any TDS deducted by your bank or employer must be mentioned in the Form 26AS. Any mistakes in the data entered will again, get you a notice. Submitting a wrong declaration will incur a penalty and tricks like splitting deposits in different banks will not help as the integrated database will spot these on the basis of your PAN information immediately. So think twice before trying to file a Form 15G or 15H as well.
The integrated database also tracks your previous employment history. If your previous employer has deducted TDS, the details are captured in Form 26AS and the CASS will spot it. Tax evasion draws a penalty of up to 300% of the tax evaded, so this is another sure-fire way to get a notice.