Not filing tax return even the tds is deducted or not filing regularly
TDS deducted by the employer and we have no statutory liabilities any more. But this is not the case to be. We have to file our tax returns even if all the taxes are paid. Filing of tax returns is mandatory. Non filing of tax returns can lead to show cause notice and non filing or non compliance. This is just one of the many reasons why an individual could be sent an income tax notice. The department has identified roughly 12 lakh people who have not filed their tax returns. Many of them are innocent offenders, who may not even know they are supposed to do so.
It's a question thousands of individuals ask themselves every year: do I have to file my tax return? Some believe they are not supposed to do so if TDS has been paid. Others believe that if their income falls below the basic exemption limit after availing of various deductions, they don't need to file returns. Adding to their confusion are certain guidelines announced by the tax department every year
For instance, two years ago, salaried taxpayers with no other source of income other than bank interest were exempted from filing returns if their annual income was below Rs 5 lakh and all taxes were paid. The objective was to exempt this segment of low-income taxpayers from the rigmarole of filing returns. However, it was misconstrued as an exemption for anybody and everybody with an income of up to Rs 5 lakh. Unfortunately, such individuals run a high risk of getting a notice from the tax department.
Filing tax return in a wrong ITR form
There are different income tax return forms for different income source. All depends upon the primary source of income. Form 1 is used for Salary and Interest Income including One House Property. Form 2 is used for Salary, 2 House Property, Capital Gains and Other Sources. If exempt income is more than Rs 5000 in total then Form 2 has to be used. Form 3 is used for a Partner in a partnership firm. Form 4 is used for Business Income from Individual Business. Notice can also be issued if tax return is not filed in correct ITR Form
Mismatch of the income and investments
If there is a mismatch between the income you have declared in your tax return, and your investments and expenditure, you are likely to get a scrutiny notice. Banks, mutual funds, credit card companies and other establishments are supposed to report certain high-value transactions to the Income Tax Department in their annual information return (AIR).
These establishments have your PAN and other details, so there is virtually no way one can sneak past them. If the system detects a mismatch in income, investments and expenses, it will automatically pick the return for scrutiny. Nearly 62 lakh investors put more than Rs 2 lakh in mutual funds or over Rs 1 lakh in stocks in 2010-11. Almost 27.5 lakh account holders deposited Rs 10 lakh in their savings bank account that year.
More than 15 lakh credit card customers spent more than Rs 2 lakh, and more than 6.5 lakh buyers bought property valued at over Rs 30 lakh. But IT Department tracks all. Almost 23 crore of such high-value transactions are under the scanner and notices have already been dispatched to thousands of taxpayers. The notice typically asks the taxpayer to respond in writing. His personal presence is not required.
TDS not matching or not credited to your PAN
TDS deducted on our income is reported by the Tax Deductor in the TDS return efiled by them. TDS is linked with our PAN and post that it reflects in our 26 AS tax credit statement. So many times it so happen that while filing the TDS return which is a bulk record statement wrong entries are done and TDS is credited to wrong PAN. Post that TDS certificate is issued to the other PAN which could be us. We file our tax returns based on the TDS certificate received and by ignorance we do not check our 26 AS which has all the tds records in our PAN. Hence mismatch of TDS results. The TDS mentioned in our return doesn’t match to our 26 AS, in this case Department issues a tax demand notice. Reconciliation of 26 AS should be done before filing of tax records. Even at times TDS deducted in our PAN is deducted in the other section but we file or claim TDS in different income source, TDS is rejected by the Department and hence tax demand notice is issued.
If there is a discrepancy, or some TDS has not been credited, approach the deductor to have it rectified. Ask them to file a revised TDS return and then recheck if it has been credited to your account. Don't do this immediately because it can be 8-10 days before TDS details are uploaded.
These are some general reasons which can lead to issuance of Notice from Income Tax Department
What should you do if you get a notice?
Incase if any notice is issued by Department of Income Tax it is always advisable to contact a tax professional or a chartered accountant who can understand the nature of the notice and based on which decide the next course of action. Adhering to the notice and reply is a must. One should follow the same strictly.
A professional would help you understand the notice, scrutinise the reason of the issuance of notice and suggest the remedial measures to the notice. Incase if it is tax demand notice which can be due to several reasons like mismatch of TDS, error in claiming the correct TDS or wrong return form filed, in these cases tax rectification can be done by filing correct return u/s 154 of Income Tax Act. Post that if the data is matched with the 26 AS and return then the tax demand is dropped in variably and tax return is processed.
Incase if you receive the show cause notice of non filing or produce the statements based on which tax return is filed you can take a help of professional who can prepare the proper case and also appear as your representative to explain your case infront of the Assessing officer issuing the notice.