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Many investors seem to be under the impression that having a permanent account number (PAN) makes it mandatory for one to file the tax return. The issue has especially attained prominence since PAN was made compulsory for investing in mutual funds.

This is a misconception. Though a taxpayer needs to have a PAN to file the tax return, the reverse is not true.

Filing a tax return is obligatory if and only if one earns an income above the basic exemption limits.

For FY 2006-07, these limits are Rs 1 lakh, Rs 1.35 lakh and Rs 1.85 lakh for men, ladies and senior citizens, respectively. So, if your income is lesser, irrespective of whether you have been allotted a PAN or not, you need not file a tax return.

Belated return

As we all know, the last date for filing the tax return is July 31. So, what happens if for some reason you are unable to file your return in time?

Don’t worry, the law allows you to file a belated return 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, 2009.

In terms of repercussions, an interest of 1% per 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 the late submission.

So, say you are a salaried employee who has not filed his or her return in time. However, the tax due from you 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 amount. Since the tax due from you has already been paid (by way of the TDS), there would be no liability on account of interest.

Remember, interest is levied only if you owe any tax to the government.

Besides the penalty, there is yet another disincentive for those not filing the tax return in time — if you have any business loss or capital loss (short-term or long-term), the same cannot be carried forward for set-off against future income.

All in all, therefore, it is advisable to submit your tax return in time.

Revised return

There is yet another concept known as ‘revised return’, which would be of relevance to some taxpayers this year. What is a revised return?

If you were to discover any omission or wrong treatment of any income or deduction or a wrong statement in your originally filed return, you may file a revised return within one year from the end of the relevant assessment year. Therefore, just like in the case of a belated return, you have time till March 31, 2009 for filing the revised return.

In the current context, a revised return would be especially relevant in the case of taxpayers who have been living in employer-provided accommodation.

This is because, the Finance Act, 2007 lowered the perk value of such accommodation from 20% to 15% for metro areas and from 15% to 10% for other places.

The interesting thing is that this amendment was retrospective in nature and applicable from FY 05-06 onwards.

However, when we filed our return for FY 05-06 (by July 2006), the erstwhile higher percentage would have been considered. Now there is a 5% benefit to be availed of, on the entire perk value considered for tax.

The difference could be significant, especially for senior level employees, and all such persons should immediately take steps to file a revised return.

However, remember we are talking of FY 05-06. Therefore, the last date for filing the revised return for that year would be March 31, 2008.

Again, note that a revised return can be filed if and only if the original return has been submitted in time.

To sum

Whether you pay in time or belated, if you owe it to the government, you have to pay tax. There is no escaping this law.

Ironical, especially if you consider that a fine is a tax you pay for doing something wrong, whereas a tax is a fine you pay for doing something right.

sandeep.shanbhag@gmail.com