Watch Out! Your income tax officer might just be looking at your financial position. The recent news about the I-T department issuing notices to thousands of people is not to be ignored. Your notice could be in queue. Please note that salaried persons are also very much included in this list.
By the way,have you observed the income tax return filing website lately? It is much improved and AS26 (Accounting Standard) is as revealing as ever. Pretty much every thing you have done with your money is being watched,tracked and monitored. I suggest you not to do anything to dodge the law or if you are ignorant then get hold of someone to advice you well.
It is a new financial year today and I suggest you to get your act together. Else you will not only have to pay a heavy price but also go through the mental agony of defending your position via accountants and lawyers as well. Not to mention the number of days you will have to take off your busy schedule.
Like I mentioned,many are getting the notice and the reasons for getting such notices are also many. Some interesting ones are as follows.
Scenario So you think you have made an innocent investment into a bond fund or a fixed deposit. You have got interest income and your tax has been deducted at source. You have not reported this or forgot to report this or this is in the name of your senior citizen parent so you get better rate or that you have not filed you IT return.
Implication The I-T department will rightly think that you have had income for which either the full tax has not been paid or that you have not filed returns or that you may also have other income which is not reported. Unfortunately,in order to ask the non-compliant to comply,sometimes honest tax payers also come into the net. For example,a non-resident who booked a short term capital gain on a bond fund or someone who has only interest income was below the taxable level and chose not to claim his refund.
Investments almost equal to income
Scenario You have booked gains from somewhere and reinvested them. The value is above Rs 2 lakh. This could also be due to unnecessary tinkering around of your mutual fund portfolio. With your impatience that the market has not performed for sometime and you blamed your advisor for bad or no returns and decided to change your advisor. As a result,old portfolio was redeemed and new one created thus resulting in fresh investments above Rs 2 lakh in value. Against all such investments your filed income for the year is much lesser.
Implication The above can happen and it is quite normal. You earn,say Rs 15 lakh but you have invested say Rs 35 lakh due to whatever reason. The tax authorities may be thinking that while you earned Rs 15 lakh how did you invest so much more. He may seek clarification and thus send you a notice asking for details. Any radical change is bound to get reflected.
Scenario You spend a huge amount of money buying things on credit card. Sometime you may do single large purchases using debit card or cash. Sometimes you give a large loan to a friend and the corresponding amount shows as inflow in his account or worse you borrowed in cash and paid in cheque,etc. All large outflows are visible on many more computers than we can perhaps imagine.
Implication Nothing wrong with all of the above prima facie. But then you do not keep bills or records of any sort. When the question of providing details comes before you; you are at a loss to explain. Institutions file things like AIR (annual information return). A lot of details are sent to various tax and government authorities and they have the right to ask you for detailed information.
If you simply keep things in order it would help,more so in times when the I-T department is working overtime to send notices. How you do this is for you to decide.
Author is Director Transcend Consulting