Monday, January 2, 2012

Didn't file tax returns for yers? Find out what to do

Vikram,31, hasn’t filed his tax returns in the last seven years. Call it laziness or sheer ignorance, either way he didn’t see the need to file returns till date.

Sanjana’s reasons:

1. For the first three years, my salary was not taxable. So, why would I be expected to file returns?

2. In the fourth year, my salary came under the tax slab. My employer has been deducting tax at source from my salary ever since. So, what’s the point in filing returns when I am already paying taxes?

"All right, then why do you want to file tax returns, now?” I asked.

”I have to travel abroad in couple of months. During my visa interview at the embassy they asked me to produce my tax returns for three or four years. I didn’t even know I was required to submit these documents for visa purpose,” said Vikram.

”What do you plan to do, now?”

”I don’t know. I am lost,” said Vikram

Here's help for Vikram and many others like here:

You need to file your income tax return if your income is higher than the exemption limit. For the assessment year 2008-09, the basic exemption limit is:

  • Men Rs 1.50 lakh
  • Women Rs 1.80 lakh
  • Senior Citizens Rs 2.25 lakh

If you earn more than the exemption limit, you have to file your returns. This holds true even if you are not eligible to pay tax.

“Vikram has contravened the provision of Income-Tax by not having filed returns for the past many years despite earning income above the threshold limit. This, by itself, is enough to land him in trouble with the Income-tax Department. The assessment officer can reopen and scrutinise Vikram's earlier assessment. If his stakes are very high, it could also lead to prosecution.”

What can Vikram do now?

Patel says, “The best option would be to file the returns for the financial years ended March 2007 and March 2008 on an urgent basis. He can submit copies of the tax return along with a copy of the Form 16 for the year ended March 2006 for the VISA application. However, he cannot file the returns for any of the earlier years as they are time barred.”

"As on date, he can file returns for a total of two years. If he files return after July 31, 2009 (the last date for financial year '08-'09 is July 31, 2009), it will be termed as a 'belated return' and the same can be submitted anytime up to March 31, 2011."

Reasons why you should file returns

”That’s not the only time you are required to produce copies of tax returns, you know?” I said.

”What?! There are more instances?” Vikram asked.

Apart from the fact that it is legally binding on you and you might need it for your visa, returns come handy when you want to take a loan. Banks usually require you to submit income tax returns.

So, it is usually for your benefit that you file returns.

Filing late

These are the consequences of filing your returns late:

1. In case Vikram doesn't file before March 31, 2009, she will liable for a penalty of Rs 5,000.

2. In case Vikram owes taxes to the exchequer, she will have to pay interest at 1 per cent per month.

3. In case of refund, interest will be calculated from the date he filed returns instead of April 1.

4. In case of loss, he will not be allowed to transfer it to next year.

5. In case Vikram has made a mistake in original return, she will not be allowed to revise his return.