Even salaried employees are now on the radar. The IT department has already identified 12 lakh taxpayers who haven't filed their returns, and over 20 crore high-value transactions are being scrutinized, and notices/letters to over 1.5 lakh people have already been issued.
If you are a taxpayer then you must have heard the recent news about Income Tax department’s drive to keep a close eye on all your transactions. Even salaried employees are now on the radar. The IT department has already identified 12 lakh taxpayers who haven't filed their returns, and over 20 crore high-value transactions are being scrutinized, and notices/letters to over 1.5 lakh people have already been issued.
So, it is time for you to hit the panic button if you do happen to get an IT notice? No, it isn't.
This three-articles series will cover these key points:
When can you expect the IT department to issue a notice?
What you need to do to avoid getting a notice from the IT department?
How to handle and respond to the notice already issued to you?
Let’s take the first parameter and see how, and under what circumstances, a notice can be issued to you
1) You have not filed your return: It is mandatory for every individual earning more than Rs 500,000 per annum to file tax returns, even if the tax is already deducted (TDS) and paid.
2) Interest from Fixed Deposits or Savings account: Banks deduct 10% tax, and if you forget to report or pay the additional taxes in case your total income falls under the higher tax bracket of 20-30%.
3) Sudden drop in income: A significant reduction in your income from last year may cause suspicion, especially in case of businessmen or traders.
4) Claiming higher refund amount: If you have filed your returns claiming a high refund.
5) Mismatch in TDS credit: You need to check & reconcile your 26AS with all the taxes as paid on your account.
6) Non-Declaration of Exempted Income: You need to report income which is exempt from tax, for example, long term capital gains on sale of shares or keeping records for gifts received from parents or relatives.
7) Change in Job: A salaried employee who has switched jobs in the previous year will get multiple form 16s, and if he fails to declare income from all the employers, and calculate and pay the due taxes, if any, then a notice can be issued. Certain deductions and benefits given twice can also fetch you a notice.
8) High Value Transactions: If you have executed high value transactions either for investments or spending, then chances of you getting a notice from the IT Department are very high.
- Credit card usage of over Rs 2 lakh p.a.
- Over Rs 5 lakh investment in fixed deposits
- Depositing over Rs 10 lakh in your bank account
- Investing over Rs 2 lakh in mutual funds
- Investing over Rs 1 lakh in shares
- Buying or selling property over Rs 30 lakh
All these transactions have to be reported to the IT department under Annual Information Returns filed by respective companies.
The next series will tell what you need to do to avoid getting an IT notice.
“Rishabh Parakh is a Chartered Accountant and the Chief Gardener & Founder Director of Money Plant Consulting, a leading Tax & Investment Planning Advisory Service Provider. He also runs a personal finance blog called “Mango Investor” aka AAM Niveshak at www.mangoinvestor.com . Readers are invited to send their feedback to rishabhparakh@moneyplantconsulting.net”
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