Income tax return filing: Warning! Big changes made, here is how it may impact you

The income tax department had recently issued alerts warning salaried taxpayers not to follow any unlawful practice of evading taxes either by way of under-reporting income or claiming excess deductions like House Rent Allowance (HRA), Leave Travel Allowance (LTA) etc. Similarly, the department also wants taxpayers to file their tax returns in time and avoid delay. In order to ensure the same, new penalty provisions have been introduced. Let us understand these new changes in detail.

Penalty for late filing

The due date for filing your tax returns for the previous financial year, that is, April 1, 2017 to March 31, 2018 is July 31, 2018. This applies to individuals who are not supposed to get their accounts audited. Basically it covers all the salaried class taxpayers. For all other class of taxpayers, the due date is September 30.

The Income Tax Act has added a new section called section 234F which levies a penalty for filing your return beyond the due date as specified, the same will be effective from the Assessment Year 2018-19.

What is section 234F

If being a salaried person, you don’t file your tax return by July 31, 2018, but you file it by, say, on or before December 31, 2018 then the penalty is Rs 5,000. If the return is filed post December 31, 2018 then the penalty is Rs 10,000.

There is one exception to this rule. In case your total income is less than Rs 5 lakh, then the penalty amount will be restricted to Rs 1,000 only.

Penalty for under-reporting

Now let us discuss under-reporting of income and claiming excess deductions or exemptions. Recently there were reports of salaried employees, working in major multi-national companies, claiming excess deductions while filing their tax returns and ultimately claiming higher tax refunds. These cases were unearthed by the income tax department in Bengaluru. Many employees had claimed losses under house property income tax head, which were based on forged documents.

The income tax department then issued an advice cautioning salaried taxpayers against under-reporting or making fraudulent claims. As per section 270A, these will be penalised and can lead to prosecution also.

What is Section 270A

Section 270A puts a penalty in case where the income is under-reported. This could be due to not reporting the same at all or by way of some misrepresentation. The penalty applicable is 200% of the total tax payable on that particular under-reported income. But in case the income is under-reported because of any other reason, then the penalty will be 50% of the total tax payable on that under-reported income. Government has amended the section 270A of the Income Tax Act after demonetisation in order to make sure that any sort of mis-reporting or under-reporting is penalised heavily.

Some cases of mis-reporting transactions as per Income Tax Act:

-Mis-representation or suppressing any material facts

-Not recording investments in the books of account

-Claiming expenses without substantiating with proper documentary evidence

-Recording false entries in the books of account

-Failure to record receipts having an impact on total income

In your tax return form you need to fill multiple details about salary and house property income, which was not the case earlier. Income tax forms ask for various details of your salary and its breakup unlike earlier.

You need to disclose the breakup of your salary like showing allowances which are not exempt, perquisites or profit in lieu of your salary and many other deductions as claimed in your Form 16.

Likewise, your income from house property also needs to be given in detail, like total rent received by you or receivable, municipal taxes paid to the municipal corporation and interest payable on your home loans, etc. In fact, taxpayers have started getting notices due to mismatch in their Form 16 income and the income as declared by them while filing their tax return, in comparison to their Form 26AS. The department tracks it all and issues intimations or notices ranging from simple inquiries to grave scrutiny notices.

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There are many incidents of salaried taxpayers not filing their income tax returns correctly, either due to lack of time or ignorance of law. They also end up making mistakes like not matching their Form 26AS and income received from all sources or, say, delaying filing their tax returns, which lands them in trouble.

By Rishabh Parakh
(The writer is chief gardener, Money Plant Consultancy)

Source: DNA Money