As financial year 2017-18 has come to an end, it is now time for individual taxpayers to start working on filing their income tax return by July 31, 2018 (except certain individual taxpayers who derive income from business/ profession and are subject to tax audit).
Fraudulent tax refunds
In January this year, the investigation wing of income tax department unearthed a racket of incorrect/ fraudulent tax refunds by employees of information technology companies based in Bengaluru, in alleged connivance with a tax advisor. Similar other incidents were also reportedly found in other locations across India.
In view of the above incidents, CBDT, the apex income tax administration body, recently issued an advisory to all individual taxpayers to refrain from any such fraudulent claims/ malpractices for avoidance of taxes. The salaried taxpayers will have to take care of following aspects while filing their income tax returns.
Penalty for late filing of ITR
This year brings a new provision of late fee payable by income taxpayers if the tax return is filed beyond prescribed due date. Salaried taxpayers, who are required to file their income tax returns by July 31, 2018 would be liable to pay late fee of (a) Rs 5,000, if they file their income tax returns after July 31 but on/ before December 31, 2018; and (b) Rs 10,000, if they file their income tax returns after December 31 but on/ before March 31, 2019. This late fee would be in addition to any interest on income tax payable otherwise.
Income tax return for FY2017-18 can not be filed after March 31, 2019. Earlier, late filing of income tax return within one year from relevant financial year did not attract any late fee/ penalty.
Further, non-filing of income tax return by an individual taxpayer (if total income exceeds `2.5 lakh) may be considered as ‘under-reporting’ of income liable for penalty equal to 50% of total tax liability, even if tax is already paid on such income by way of TDS. Under earlier provisions of Section 271, if tax on entire income was already paid by way of TDS, non-filing of income tax return attracted a meagre penalty of Rs 5,000. Accordingly, salaried taxpayers, who have discharged their income tax liability by way of TDS and have been issued TDS certificate in Form 16, should file income tax return, if their total income exceeds Rs 2.5 lakh.
Do not make false claims in ITR
The tax department has advised salaried taxpayers to strictly comply with income tax provisions and avoid resorting to any such means of fraudulent/ false claims to reduce their income tax liability or claim incorrect tax refunds. The income tax department has extensive risk analysis system and any such incorrect claim made/ fraudulent measures adopted by taxpayers will not only result in delay in processing of refund claims but may also result in scrutiny of such returns post processing of returns by the CPC.
The CBDT has also mentioned that in addition to penalty/ prosecution as prescribed under income tax laws, in case of government/ PSU employees, it may also result in reference being made to concerned vigilance division for action under conduct of service rules. Clearly, the CBDT has been taking a very serious note of incorrect/ fraudulent claims made by taxpayers and it is advisable for taxpayers to comply with the income tax provisions and seek correct advice from professionals, if required.
Shailesh Kumar is director, Direct Taxation, Nangia & Co LLP