As the financial year nears its end, there are many who are still battle the basic about paying tax. While, those who know it will soon get busy finalising their income tax returns. Many will, and do it year after year, run from pillar to post wondering what is the basic exemption, which instruments to invest in to get tax exemptions, what is their outstanding tax liability and how do they pay it.
Some others battle with misconceptions like having a Permanent Account Number (PAN) is mandatory to file income tax returns. This primarily came up ever since PAN was made compulsory for mutual funds investments. Some others think that having a PAN makes return filing a must, irrespective of their income. Then, there are those (salaried) who feel if tax is deducted at source on monthly take home salary, they have no further tax obligation.
Though a taxpayer needs a PAN to file tax returns, the reverse is not true. Similarly, even though TDS has been deducted on one's income, filing tax returns could be obligatory. Basically, the rule is that if one earns an income above the basic exemption limit, it is obligatory on such a person to file tax returns. And if you haven't, here's what you can do -
Advance Tax: All taxable income including capital gains is liable for payment of advance tax. Advance tax is compulsorily payable where the tax payable for the financial year works out to Rs 10,000 or more. The following table contains the due dates for payment of advance tax.
For the purposes of payment of advance tax, taxpayers have to estimate their income for the year and pay the required installment of advance tax (net of TDS) by the due date specified. As we know, the first two due dates have already passed and the last due date of March 15 is fast approaching. For this, a taxpayer can revise the remaining installment of advance tax in accordance with the revised estimate of income earned for the year. If advance tax is not paid on time, by way of a penalty, broadly simple interest at two per cent a month is payable on the shortfall.
| ADVANCE TAX PAYMENTS | |
| Due date | For a non-corporate assessee |
| On or before September 15 of FY | Up to 30 percent of advance tax payable |
| On or before December 15 of FY | Up to 60 percent of advance tax payable |
| On or before March 15 of FY | Up to 100 percent of advance tax payable |
Belated Return: As mentioned earlier, the last date for filing the tax return is July 31. If for some reason you are unable to file your return in time, there is no cause to worry. The law allows you to file belated returns at any time before the end of one year from the end of the relevant assessment year. In other words, if you file a return after July 31, it will be termed as a belated return and the same can be submitted anytime up to March 31, 2014.
In terms of repercussions, an interest of one per cent a month will be levied on any tax due. Also, the tax official has the option of imposing a penalty of Rs 5,000 on account of late filing. Say you are a salaried employee who has not filed his / her returns on time, the tax due has already been deducted at source in the usual course. In this case, the maximum downside even for a late filing would be the Rs 5,000 penalty. Since the tax due has already been paid (via TDS), there will no interest levied. Interest is levied only if you owe tax to the exchequer.
However, if you have any business or capital loss (short- or long-term), the same cannot be carried forward for set-off against future income, if the tax return is not filed in time.
So, it is always advisable to submit your tax returns in time. If you cannot do so due to unavoidable circumstances, then the consequences are as detailed above.
Revised returns: As the name suggests, if you were to discover any omission or wrong treatment of any income or deduction or a wrong statement in your originally filed income tax returns, then within one year from the end of the relevant assessment year, you may file the revised or corrected returns. Just like in the case of a belated returns, you have time till March 31, 2014 for filing revised returns.
For instance, Mr Desai (name changed on request) had originally filed his return for financial year 2010-11 by July 31, 2011. However later, at the time of calculating his advance tax, he realised that he had erroneously claimed an amount of Rs 2 lakh in his income tax returns. What he thought was the maturity amount from an equity mutual fund was in fact interest income from an old bond investment. After paying the requisite amount of tax with interest due thereon, Mr Desai went on to file revised returns correcting the error in the previously filed return. Here note that revised returns can be filed only if the original returns had been submitted on time.
For financial year 2011-12, the basic exemption limit is Rs 1.80 lakh, Rs 1.90 lakh and Rs 2.50 lakh for men, ladies and senior citizens, respectively. If your income is lower than the specified exemption limits, irrespective of whether you have been allotted a PAN or not, you need not file a tax returns. On the other hand, if your income is higher than the limit then, irrespective of the tax deducted at source (TDS), you have to file returns. Note that income in this context is your gross income, that is, before claiming any deduction.
The writer is Director, Wonderland Consultants.
