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).
Donít 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 received 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 donít 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 wonít 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.
Donít 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