Alok Patnia founded Taxmantra.com, an expert in tax advisory & compliance. He is a Chartered Accountant having prior exposure with Ernst & Young & KPMG.
It is tax season again! Even though there is a lot of helpful information on the internet, there are some rumors that don’t necessarily help you. We have put together a list of Top 10 Myths busted about Income Tax Return Filing for Businesses and self employed .
Myth 1: I am not making profits so I don’t need to file return
Fact: Income tax act requires every person (Individual, firm, HUF, LLP, Company) to file income tax returns if the total income exceeds the maximum amount which is not chargeable to income tax. However, the law does not prohibit the assessee from income tax return filing if the total income doesn’t exceed the maximum exemption limit.
Every company is required to file a return of its income or loss in every financial year. Startups and Smaller companies generally believe that since the initial year does not bring any profits, hence it’s not required to file returns. But losses incurred in the initial years can actually be utilized to lower tax burden in the future profitable years, if the loss income tax returns has been filed within the due date.
Myth 2: My refund is delayed by my lawyer /CA
Fact: If you file your return early, your tax returns will also get processed early resulting in timely refunds. Your tax return goes to the Income tax department. The tax professional files your tax return in on your behalf through the income tax portal. The professional files your return with all diligence and utmost care. There can be other reasons for your refund getting delayed : mismatch in the tax paid details, error in bank account details, technical problems at the department, growing number of tax payers, change in mailing address.
Myth 3: I cannot file ITR apart from my usual place of residence
Fact: You can file your return from anywhere in India, even if you have shifted to a new place. Your complete record is maintained with income tax department as per your PAN data.
Myth 4: E-filing is not safe
Fact: E-filing is safer than paper filing as your return is going directly to the secured server of Income Tax department. But you must check the trust worthiness of the site you choose to prepare your income tax return. Even if you physically submit your income tax return, and get acknowledgement, your return will be processed online by the department.
In fact e-filing provides you with certain benefits. When you e-file your return you don’t have to stand in long lines when you e-file. E-filing your tax return also provides greater accuracy than filing a paper tax return.
Myth 5: Return filing is not mandatory if I have paid all my taxes and interests and there is no refund due to me
Fact: Amounts paid as advance tax and withheld in the form of TDS or collected in the form of TCS will take care of your tax due only on completion of self-assessment of your income. This self-assessment is intimated to the department by way of filing of return. Only then does the government acquire rights over the prepaid taxes as its own revenue. Filing of return is critical for this process and, hence, has been made mandatory. Failure will attract levy of penalty.
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Myth 6: So far I have never paid any tax. If I file a return this year, the IT department will ask me about my earlier years’ income
Fact: It is never too late to start honoring your constitutional obligations for payment of tax. The department may ask you to file return of income for earlier years if it finds that you had taxable income in those years.
Myth 7: My bank accounts details which I have not provided in my tax return will remain hidden from the IT department
Fact: Even if you have mentioned one bank account number in ITR, under the AIR scrutiny (CASS), Income Tax department can find out your all other bank accounts if any.
Myth 8: Last date of filing return for year 2014-2015 is Mar 2015
Due date for filing return of income earned during the financial year 2013-2014 is:
July 31st, 2014- for those who have total income above the maximum exemption limit and doesn’t need to get their accounts audited
Sept 30th , 2014- for those who need to get their accounts audited under Income tax act, 1961.
Those who have not filed their return by above dates can file a belated return by March 31 2015.
Myth 9: If I don’t file return, nothing will happen and I am safe
Fact: You are not safe if you don’t file your return. To explain your genuine sources of income you should always file your return. In following cases you might need to show your return statements:
If you want a VISA in embassy, bank loan or limit & for various other places ITR documents are required.
Non-payment of taxes also attracts interests, penalty and prosecution.
Prosecution proceedings can be initiated when the I-T return is not filed by the statutory due date or within the time permitted by the tax authority in the notice sent requiring filing of such returns. Section 276CC of the I-T Act enables such prosecution proceedings to be carried out.
However, provisos to this section provide for some relief in certain instances. In respect of income earned during fiscal 2013-14 (April 1, 2013 up to March 31, 2014) salaried employees had to file their I-T returns by July 31, 2014. However, even if the returns are filed by March 31, 2015, prosecution proceedings will not be attracted.
Similarly, no prosecution proceedings are initiated if the tax payable after prepaid taxes (advance tax and tax deducted at source) does not exceed Rs 3,000.
However, such relief from prosecution is not available in case of a failure to file I-T returns in response to a notice sent by the tax authorities.
Myth 10: I have lost my PAN card and IT department requires PAN card for return filing
Fact: If you have been allotted PAN and in case you have lost your card or you have re-applied for the same number you can show the online copy at filing counter if you are doing the paper filing. In case of e-filing, there is no requirement of any PAN card copy to be send.
Being self-employed is great. The bottom line is- stay away from misconceptions and file your taxes in time to avoid any penalties and interest. Top 10 Myths busted about Income Tax Return Filing for Businesses and self employed.