If you have paid it,show it

It is essential to file returns when your income exceeds the basic exemption limit,even if after your investment planning,the effective tax obligation becomes nil. Therefore,in FY 2009-10,filing of tax returns is essential if

* Individuals earn taxable income exceeding Rs 1,60,000 per annum

* Women have taxable income exceeding Rs 1,90,000 per annum

* Senior Citizens earn taxable income exceeding Rs 2,40,000 per annum

Tax Evasion

Income tax authorities allow you to self assess your income and pay taxes accordingly. Many people tend to believe that his or her income tax return is a drop in the ocean for the income tax authorities and therefore,do not declare income or understate it to save a few bucks. Deliberately hiding income from tax authorities to reduce tax liability accounts for tax evasion. Some examples of tax evasion include not declaring interest received on bank fixed deposits or accepting income in cash and not route it through an official system.

Methodology

In case of likely tax evasion,the tax department uses a computer-aided scrutiny system (CASS) that picks up cases by using various criteria. Since it is a computerised system,you too can come under scrutiny. If an individual is caught,he or she has to furnish whole lot of details that could include,bank account statements,list of assets owned by you and your family,details of the members of family that reside with you. A tax officer will then do a match analysis of income and expenditure to figure out the amount of tax evasion.

The income tax officer can serve the scrutiny notice within a year from the end of the month in which you have filed your return. So,if you had filed income tax return in March 2008 for FY2008,on July 24,2008,you may get a notice any time on or before July 31,2009. The notice will be in a fixed format with your name,address PAN and the year in which it is issued and time and date when the tax payer should appear before the income tax officer. The tax payer need not appear personally before the income tax officer. He can authorise a representative to plead his case.

Impact of tax evasion

Individual who conceal income can attract a penalty equivalent to an amount of up to 3 times the amount of tax evaded. So if tax evasion amount is Rs 50,000,then the

defaulter might have to pay a penalty amount anywhere between Rs 50,000 and Rs 150,000 on a case-to-case basis.

Coming under the tax man’s scanner is certainly not a pleasant experience as it can be emotionally and mentally draining. Hence it makes sense to comply with the income tax regulations and file your returns correctly. In an attempt to save a few bucks,you might not want to be in a situation where you have tax men chasing you all the time.

Filing returns has advantages and hence it may make sense to file returns even if you’re not needed to because it is an important document that has a lot of weightage.

Documents to be kept handy for filing returns

In order to calculate your tax liability and file accurate returns,it is essential to keep all the tax saving documents handy. The documents required include:

* Form 16: This document can be obtained from the employer and contains information on the salary and tax deducted by your employer.

* Form 16A: This document is required in case you have received any payments from other people or institutions who have deducted tax before making payments to you during a financial year. This includes banks or companies where you might have opened a fixed deposit or parties to whom you have given loan.

l Copy of bank statements: These statements will give you an idea of the total income earned and expenditure incurred. A consolidated statement,like this one,will ensure that you have not missed any details that should be a part of your income tax return.

l Proof of investments: Proof for all the deductions claimed in the return filed i.e. PPF,NSC,mutual funds,insurance among others

l Documents concerning investment in property: If you have bought any property during the year,you will need details. In case the property has been purchased on loan,then the loan document along with a copy of the certificate of the payments made is needed.

l Documents on purchase and sale of investments/assets: Keep a track of all your investments in equities,debt or any other instrument. Record the purchase date and sale date so that you can assess the profit or loss for the purpose of filing returns.

The tax payer is not required to submit any documents at the time of filing returns. However,it is essential that all the above mentioned documents or information should be preserved at least for a couple of years as they may be useful to substantiate the return filed if it is picked up for scrutiny.

The writer is chief executive officer at the BankBazaar.com