 "Filing tax return is important, but it is not the final step")
Most of us would be completing the filing of Income Tax Return ('ITR') for FY 2012-13 by 31 July 2013. I am sure many questions often come to your mind on the upcoming challenges. Is everything done and dusted for FY 2012-13 or will you get a notice from tax office? If yes, does one need to do anything now to be ready for it? If you have claimed a tax refund, when and how will you get it? And so on.
While completing the task of filing of ITR is an important milestone, however, the same is surely not the final one. The Tax Office would like to verify your ITR and ensure if all transactions, tax payable thereon have been reported therein and such taxes have been duly paid. Accordingly, it is important to understand the process deployed by the Tax Department, likely outcomes and challenges, if any, which could arise there from and be prepared for it.
Challenges in credit of tax deducted at source
Most of the ITRs are processed and verified through a computerised process wherein arithmetically accuracy of numbers is checked and intimation is sent to tax payer thereafter. If you have filed your ITR electronically, you would get intimation from Central Processing Centre (CPC) of the Tax Department. In case you have not filed your ITR electronically, you would get intimation from your jurisdictional Tax Officer. In case you owe a tax refund from the Tax Department, it is recommended to file your ITR electronically, as usually, the CPC process ITRs much faster than the local Tax Office.
In case you have claimed a tax refund in the ITR, the same would be credited to your bank account directly, and in case you have opted for it in the ITR or otherwise refund cheque would be send to your correspondence address in due course.
However, in case the numbers do not tie up (for example, TDS claimed in ITR is not matching with Form 26AS), then, the intimation would show tax demand payable by you (or reduction in tax refund claimed).
In such a case, you will have to identify the reason for the same
and then take necessary action (which could be filing an application for rectification of the intimation or payment of tax demand).
For instance, one of reasons for mismatch of TDS claimed in ITR vis-à-vis as appearing in Form 26AS could be non-quoting of your PAN by the Tax Deductor in the eTDS statements filed by him. In such a case, you will have to get in touch with Tax Deductor and request him to rectify the said error by filing a correction eTDS statement for relevant quarters.
Challenges in detailed scrutiny by the Tax Office
Few ITRs are also picked up for detailed scrutiny randomly by the Tax Office using Computer Assisted Scrutiny System (CASS). Once your case is picked up for a detailed scrutiny, the Tax Officer would verify the ITR filed by you in detail, call for underlying details/ documents for verification, ask relevant questions to examine the ITR and then pass an assessment order reporting his findings therein.
Accordingly, it is recommended that one should prepare a file containing all the relevant supporting details/ documents of the ITR, at the time of its filing itself and keep it ready for verification by the Tax Officer, if the ITR is picked up for detailed scrutiny by the Tax Officer. Specifically, for reimbursement claims like medical, LTA, business expenses and for investments, Tax Officer would insist on verifying supporting documents.
High Value transactions executed during the year?
Certain high value transactions (for instance, purchase or sale of immovable property value for Rs 30 lakh or more, payments through credit card of Rs 2 lakh or more during the year) executed by you are reported by various authorised intermediaries (that is, property registrar or issuer) to the Tax Department through Annual Information Report (AIR) and these are co-related to the details filled in your individual tax return.
If you have entered into any high value transactions during FY 2012-13, it is likely that you might receive notice from the Tax Department's special cell monitoring AIRs requesting for various details about the transaction(s). The purpose of issuing such notice is just to ensure that the tax payable, if any, is duly discharged by the respective tax payer. Accordingly, in case you happen to receive such a notice, you just need to submit the requisite details asked for. There is nothing to worry about, if you have reported all the income earned during the said year.
Concluding Remarks:
Once you have filed your ITR with due care (for example, ensuring TDS is matching with Form 26AS, all income is offered to tax, when ITR has been filed electronically, Form ITR-V is sent to CPC within prescribed time limit, and so on) and all supporting documents are ready with you, it should be a safe and smooth journey thereafter, even if you receive tax notice enquiring about your tax affairs.
The writer is Tax Partner, Ernst & Young (Mitesh Thakkar, Senior tax professional, Ernst & Young, contributed to the article.)
(Views expressed are personal)
While completing the task of filing of ITR is an important milestone, however, the same is surely not the final one. The Tax Office would like to verify your ITR and ensure if all transactions, tax payable thereon have been reported therein and such taxes have been duly paid. Accordingly, it is important to understand the process deployed by the Tax Department, likely outcomes and challenges, if any, which could arise there from and be prepared for it.
Challenges in credit of tax deducted at source
Most of the ITRs are processed and verified through a computerised process wherein arithmetically accuracy of numbers is checked and intimation is sent to tax payer thereafter. If you have filed your ITR electronically, you would get intimation from Central Processing Centre (CPC) of the Tax Department. In case you have not filed your ITR electronically, you would get intimation from your jurisdictional Tax Officer. In case you owe a tax refund from the Tax Department, it is recommended to file your ITR electronically, as usually, the CPC process ITRs much faster than the local Tax Office.
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If everything ties up (that is, calculation of taxable income and tax liability thereon is correct, credit of Tax Deducted at Source (TDS) claimed in the ITR matches with Annual Tax Credit Statement in Form 26AS), intimation would reflect acceptance of ITR filed by you.
In case you have claimed a tax refund in the ITR, the same would be credited to your bank account directly, and in case you have opted for it in the ITR or otherwise refund cheque would be send to your correspondence address in due course.
However, in case the numbers do not tie up (for example, TDS claimed in ITR is not matching with Form 26AS), then, the intimation would show tax demand payable by you (or reduction in tax refund claimed).
In such a case, you will have to identify the reason for the same
and then take necessary action (which could be filing an application for rectification of the intimation or payment of tax demand).
For instance, one of reasons for mismatch of TDS claimed in ITR vis-à-vis as appearing in Form 26AS could be non-quoting of your PAN by the Tax Deductor in the eTDS statements filed by him. In such a case, you will have to get in touch with Tax Deductor and request him to rectify the said error by filing a correction eTDS statement for relevant quarters.
Challenges in detailed scrutiny by the Tax Office
Few ITRs are also picked up for detailed scrutiny randomly by the Tax Office using Computer Assisted Scrutiny System (CASS). Once your case is picked up for a detailed scrutiny, the Tax Officer would verify the ITR filed by you in detail, call for underlying details/ documents for verification, ask relevant questions to examine the ITR and then pass an assessment order reporting his findings therein.
Accordingly, it is recommended that one should prepare a file containing all the relevant supporting details/ documents of the ITR, at the time of its filing itself and keep it ready for verification by the Tax Officer, if the ITR is picked up for detailed scrutiny by the Tax Officer. Specifically, for reimbursement claims like medical, LTA, business expenses and for investments, Tax Officer would insist on verifying supporting documents.
High Value transactions executed during the year?
Certain high value transactions (for instance, purchase or sale of immovable property value for Rs 30 lakh or more, payments through credit card of Rs 2 lakh or more during the year) executed by you are reported by various authorised intermediaries (that is, property registrar or issuer) to the Tax Department through Annual Information Report (AIR) and these are co-related to the details filled in your individual tax return.
If you have entered into any high value transactions during FY 2012-13, it is likely that you might receive notice from the Tax Department's special cell monitoring AIRs requesting for various details about the transaction(s). The purpose of issuing such notice is just to ensure that the tax payable, if any, is duly discharged by the respective tax payer. Accordingly, in case you happen to receive such a notice, you just need to submit the requisite details asked for. There is nothing to worry about, if you have reported all the income earned during the said year.
Concluding Remarks:
Once you have filed your ITR with due care (for example, ensuring TDS is matching with Form 26AS, all income is offered to tax, when ITR has been filed electronically, Form ITR-V is sent to CPC within prescribed time limit, and so on) and all supporting documents are ready with you, it should be a safe and smooth journey thereafter, even if you receive tax notice enquiring about your tax affairs.
The writer is Tax Partner, Ernst & Young (Mitesh Thakkar, Senior tax professional, Ernst & Young, contributed to the article.)
(Views expressed are personal)