Deadline for filing revised or belated income tax return for past 2 assessment years is March 31

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The date you actually need to focus on is March 31, because that is the last day to file revised and belated income tax returns (ITR) for assessment years (AY) 2016-17 and 2017-18, with interest, if any, for late filing. This is not to be confused with the deadline for filing taxes for the current financial year, which is on or before July 31. Last year this deadline was extended till August, but the gesture may not be repeated.

So if you are yet to file older ITRs, “there’s still time” to “come clean” as a recent advertisement put out by the income tax department reminds folks. The ad goes on to exhort companies, firms, LLPs, trusts, associations and political parties (whose income prior to claim of exemptions exceeds the minimum chargeable to tax) to file taxes. Similarly, individuals earning over Rs 2.5 lakh have to pay income tax while the exemption limit for senior citizens (aged 60-80 years) is Rs 3 lakh and that for very senior citizens (over 80 years) is Rs 5 lakh.

“If you have deposited large amounts of cash in your bank account or made high value transactions, please consider the same while filing income tax returns,” says the communication, adding that “Non-filing or incorrect filing of return of income may result in penalty and prosecution”. The easy way to do it is online, either by logging into the tax department’s e-filing website (incometaxindiaefiling.gov.in) or the likes of Cleartax.com and Taxspanner.com, which are far more user friendly. Keep in mind that failure to file returns for the AY 2017-18 by March 31 means no second chances.

Belated filing, of course, poses serious drawbacks. Not only do you lose the opportunity to avail of select exemptions and carry forward losses (other than house property loss) for the assessment years for which ITR were not filed, you may have to shell out extra as interest under section 234A, perhaps even sections 234B and 234C, which deal with advance tax. The latter is applicable on all individuals with a tax liability exceeds Rs 10,000 after your employer has deducted the TDS.

For any defaults in filing your ITR, according to Cleartax, “you will be charged an interest amount of 1% per month (simple interest) on the tax amount outstanding. This interest will be calculated from the due date applicable to you for filing of return of the applicable year till the date that you actually file your return.”

Here’s an example. Assume your total tax outstanding is Rs 1 lakh and you forgot to file your return. Your tax liability will calculated at 8% (8 months late till the end of the assessment year on March 31) of Rs 1 lakh, or Rs 8,000, over and above the tax amount that you are due to pay in any case.

That apart, “a penalty of Rs 5,000 shall be levied under section 271F”, says the FAQ on the income tax website. With effect from AY 2018-19, a new section 234F will come into play, under which the penalty for ITRs furnished on or before December 31 is Rs 5,000, but double that amount for later filings. However, penalty “shall be levied @ Rs 1,000 if total income does not exceed Rs 5,00,000” and if the tax evaded “exceeds Rs 25 lakh the punishment could be 6 months to 7 years” adds the website.

Also keep in mind that silly mistakes often creep in when one is trying to beat a deadline, like erroneously leaving a mandatory field empty or forgetting to report interest income. So make sure no discrepancies creep in while filing your returns, else you could be staring at a demand notice from the taxman, which means extra paperwork for you.

Thankfully, at least this headache will disappear from the next assessment year on. Earlier this month the CBDT announced that demand notices won’t be issued in cases of a minor mismatch between a taxpayer’s ITR and the corresponding tax credit data collected from banks and other financial institutions.

Source: Business Today

Shell companies crackdown: Govt removes exemptions from ITR filing

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The Union Budget 2018-19 has rationalised the I-T Act provision relating to prosecution for failure to furnish returns.

Seeking to crackdown on shell companies, the government has proposed to remove exemption available to firms with tax liability of up to Rs 3,000 from filing I-T returns beginning next fiscal.

The Union Budget 2018-19 has rationalised the I-T Act provision relating to prosecution for failure to furnish returns.

Thus, a managing director or a director in charge of the company during a particular financial year could be liable for prosecution in case of any lapse in filing I-T returns for any financial year beginning April 1.

“The income tax departments would now track investments by these companies. Also, the focus will be on those firms that show less profit and also those who file I-T returns for the first time,” a senior finance ministry official said.

There are around 12 lakh active companies in the country, out of which about 7 lakh are filing their returns, including annual audited report, with the ministry of corporate affairs. Of this, about 3 lakh companies show ‘nil’ income.

The Section 276CC of the Income Tax Act provided that if a person wilfully fails to furnish in due time the return of income, he shall be punishable with imprisonment and fine.

However, no prosecution could be initiated if the tax liability of an assessee does not exceed Rs 3,000.

The government has amended the provision with effect from April 1, 2018 and removed the exemption available to companies.

“In order to prevent abuse of the said proviso by shell companies or by companies holding benami properties, it is proposed to amend the provisions… so as to provide that the said sub-clause shall not apply in respect of a company,” it said.

The official said that as many as 5 lakh are companies not filing returns and they could be a potential source of money laundering. “These could be small firms which are engaged in honest business, but there could be some which are a potential threat. We have to look into the data.”

Nangia & Co Managing Partner Rakesh Nangia said though the amendment has been brought about to prevent abuse by shell companies/benami properties, checks similar to those placed in the law for invoking GAAR, should be in place to avoid genuine hardship.

“Though the taxman may be driven by compulsions to ensure proper tax compliance, care must be taken while taking such action. In most developing countries, prosecution for tax matters is applied only in cases of serious tax frauds and not in general compliance matters,” Nangia said.

The Budget announcement follows the recommendation of the task force on shell companies, which was set up in February last year.

In the government’s fight against black money, shell companies have come to the fore as they are seen as potential for money laundering.

Till the end of December 2017, over 2.26 lakh companies were deregistered by the MCA for various non-compliances and being inactive for long.

Shell companies are characterised by nominal paid-up capital, high reserves and surplus on account of receipt of high share premium, investment in unlisted companies, no dividend income and high cash in hand.

Also, private companies as majority shareholders, low turnover and operating income, nominal expenses, nominal statutory payments and stock in trade, minimum fixed asset are some of the other characteristics.

Since last year, the Central Board of Direct Taxes (CBDT) — the apex policy making body of the I-T department — has been sharing with the MCA specific information like PAN data of corporates, Income Tax returns (ITRs), audit reports and statement of financial transactions (SFT) received from banks.

 

Source: Times of India

IT raid cases not to be processed under e-assessment: CBDT

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The soon-to-be rolled out pan India e-assessment system for scrutiny cases of taxpayers will not be applicable to instances where a raid has been conducted against an assessee by the Income Tax (IT) department, the CBDT has said.

It has added that the current system of manual assessment will continue in cases, where the books of accounts or original documents have to be examined, the taxman has to conduct a third-party investigation and where the tax officer has to examine a witness.

It will also be applicable to cases where the taxman has issued a show-cause notice to the assessee, “contemplating any adverse view”, and cases where the taxpayer has requested for a “personal hearing” to explain the matter to the assessing officer.

The Central Board of Direct Taxes (CBDT), the policy- making body of the IT department, issued an instruction yesterday to further explain how the system would work, once fully operational.

“…It is hereby directed that except for search-related assessments, proceedings in other pending scrutiny assessment cases shall be conducted only through the e-proceeding facility…,” the instruction said.

It added that in ranges where the IT offices were not equipped with computer infrastructure and Internet services as of now, the taxman should “complete only 10 per cent of the scrutiny cases having the potential to effect recovery during the current year itself”.

If an assessee objects to the electronic assessment, it may be “kept on hold” for the time being, the instruction said.

Finance Minister Arun Jaitley had, in his budget speech, announced that the process of electronic assessment of tax returns would be launched in the country, which would “almost eliminate person-to-person contact, leading to greater efficiency and transparency”.

CBDT Chairman Sushil Chandra, during a recent interview with , had said the e-assessment procedure would henceforth be handled by two officers, instead of the current system involving a single assessing officer (AO).

The functionality to conduct the e-proceedings would be available for all types of notices, questionnaires and letters issued under various sections of the I-T Act, the CBDT had said earlier.

Source: Times of India

Direct tax mop-up jumps 19% in FY18

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Direct tax collections during the first nine-and-a-half months of the current fiscal have risen by 18.7% to Rs 6.89 lakh crore, the tax department said on Wednesday.

The collections till January 15, 2018 represent over 70% of the Rs 9.8-lakh-crore revenue target from direct taxes, the Central Board of Direct Taxes (CBDT) said in a statement.

 

Gross collections (before adjusting for refunds) have increased by 13.5% to Rs 8.11 lakh crore during April, 2017 to January 15, 2018. Refunds amounting to Rs 1.22 lakh crore have been issued during this period.

Stating that there has been “consistent and significant” improvement in the position of direct tax collections during the current fiscal, the CBDT said the growth rate of total gross collections has improved from 10% in Q1, to 10.3% in Q2, to 12.6% in Q3 and to 13.5% as on January 15, 2018.

Similarly, the growth rate of total net direct tax collections has climbed up from 14.8% in Q1, to 15.8% in Q2, to 18.2% in Q3 and to 18.7% as on January 15, 2018.

The growth in corporate tax collections has risen from 4.8% in the first quarter of current fiscal to 10.1% in Q3 and 11.4% as on January 15, 2018.

Similarly, the growth rate of net corporate tax collections increased from 10.8% in Q2 to 17.4% in Q3 and to 18.2% as on January 15, 2018.

 

Source: Times of India

Unexplained deposits in focus, taxmen ordered to go all out in the next three months

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About two months ago, tax offices were directed to accept only those revised tax returns where there is a “bonafide inadvertent error” or “a mistake” on the part of the assessee.

The income-tax department will in all likelihood go into overdrive in the next three months with the Central Board of Direct Taxes — the apex body — alerting all senior tax officials that their performance is being “monitored at the highest level.” It will also give a renewed push towards imposing and recovering tax on Rs 3 lakh crore deposit, which is suspected to be the quantum of unexplained cash parked with banks post demonetisation.

“There will be searches, surveys, information verification, and follow-ups. Explanations on ‘cash in hand’ amounts are being sought from different kinds of assessees, and not just from large establishments and jewellers… We will be knocking on many doors even if our respective targets are met,” a senior tax officer told ET.

This was broadly the message conveyed by the CBDT chief during a recent video-conference with tax officials.According to another person in the department, direct tax offices in various circles may be required to go full steam due to a drop in GST collection following cut in tax rates and refunds.

‘Dispose of Appeals Before March 31’
Till now many in the department were caught up with assessments pertaining to notices which were sent in September 2015 (for the financial year 2014-15) as these matters were getting time-barred in December 2017. Now, tax officers have the time to focus on recovery till March 31. “A possible slowdown in income tax refund, directing the CIT Appeal to dispose of appeals confirming the additions, investigating cases where assesses have deposited more than Rs 10 lakh in demonetised notes may push up gross collection. But does this really reflect the true state of tax collection in a slowing economy where the GDP growth rate is admitted to have come down,” said senior chartered accountant Dilip Lakhani.
In some of the large tax collection zones like Mumbai, the chief commissioner has written to several offices of the commissioner of income tax (Appeals), which is the first appellate authority, to dispose of many appeals before the close of the financial year.

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Tax authorities technically have the power to come down heavily on those who are unable to explain their cash deposit by slapping 60% tax and penalty – even though the process could take some time.

About two months ago, tax offices were directed to accept only those revised tax returns where there is a “bonafide inadvertent error” or “a mistake” on the part of the assessee. This was to tax the unaccounted cash that was deposited after demonetisation (of high denomination currency bills in November 2016) and subsequently regularised through a revised return and payment of tax on it at the normal rate of 30%.

However, the communique to tax officers guidelines were only suggestive in nature as the law allows filing of revised return due to various reasons including an intention to conceal income.

You can shift residence, fudge address but you can’t avoid income tax notice anymore

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Avoiding income tax notices by fudging addresses or shifting residence will now become difficult. Income tax rules have been amended that will allow the tax department to deliver notices to assessees at addresses given by them to banks, insurance companies, post offices etc in case the notice is undeliverable at the address supplied to the tax department.

The government issued a notification dated December 20, 2017 amending the Income Tax Rules to ensure that all notices, summons, requisitions or any other communication issued in your name is delivered to you either via post or e-mail.

As per the notification, in case the communication or notice to be served to the assessee cannot be delivered/transmitted to the available address, as per Rule 127 of the Income Tax Rules, the government may use the address mentioned in the following databases to deliver the communication:
a) Address given by you to the bank;
b) Address given by you to the insurance company;
c) Address given by you to the post office while investing in the Post Office schemes;
d) Address as available in government records;
e) Address available in the records of local authorities;
f) Address of the assessee as furnished in Form 61 to the income tax department under Rule 114D;
g) Address as furnished in Form 61A to the tax department under rule 114E.

As per the earlier norms, the communication to the assessee was sent through post or email at the any of the following addresses:

a) Address available in the PAN database;
b) Address available in the income tax return (ITR) to which the communication pertains to;
c) Address as available in the previous year’s ITR;
d) E-mail address available in the ITR for which communication pertains to;
e) E-mail address as available in the last ITR;
f) Any e-mail address available with the income tax authority.

The notification has been published in the Gazette of India by the Minsitry of India vide Notification No. 98/2017/F. No. 370142/36/2017-TPL

Link: Economic Times