It was a shock of her life for Rabia Shah, a Mumbai-based marketing manager, when she received a tax notice last week.
It was a shock of her life for Rabia Shah, a Mumbai-based marketing manager, when she received a tax notice last week. She couldn’t figure out why, and failed to connect the dots since she had been quite upfront in paying her taxes and filing returns.
The problem lay elsewhere, which she blissfully ignored – not declaring her shopping transactions made through her credit card which added up to as much as Rs2.5 lakh for the year. And this is precisely where most credit card users get trapped who generously swipe their cards but forget to disclose the same while filing returns, point out experts.
Consider another instance where you have used your card for somebody you know and the bill has exceeded the Rs2 lakh mark for the year. Even if you have footed the bill before the due date, chances are you can face the I-T heat. So, next time you lend a hand, get your math right.
What can also attract penal provision is the case when there is a cash deposit of Rs10 lakh or more in a year. If your public provident fund (PPF) matures and gets deposited in your savings account, taking the total deposited sum in a year way past Rs10 lakh, you can run into trouble. You will also be on a sticky wicket if your tax outgo is very high on account of income from any sale of property one year and the next year, you pay up only on your salary.
How does this work? A computer-generated software does a random check, and in case an anomaly is spotted or if you have crossed the transaction limit, a letter will be issued immediately. Mehul Sheth, a chartered accountant, would rather like you to play it absolutely safe rather than stay secure in the fact that you haven’t got any tax notice in the following year.
What if you get the notice? The first step, explains Vineet Agarwal of KPMG, is to reply to the tax notice. “To make your case stronger, you need to keep all the bills (credit card) or other documents (in case of property) handy to furnish them before the I-T department,” he adds. In the other scenario where you haven’t declared the expense or income, you will have to settle with filing revised returns and pay a penalty on the same.
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