Trust = LIC OF INDIA

Trust = LIC OF INDIA

திங்கள், 14 மே, 2018

Misreporting your income to I-T Department? Here’s how taxmen can penalise you now

Under-reporting or misreporting your income to I-T Department? Here’s how taxmen can penalise you now

May 1, 2018
Under-reporting or misreporting your income to I-T Department? Here’s how taxmen can penalise you now

As a taxpayer, it is very important for you to know that while filing the income tax return, if a person under-reports his income or inflates his deduction/exemption, then the Income Tax Department can impose a penalty on him under Section 270A of the Income Tax Act, 1961. You must be wondering that the Section 270A of the I-T Act is not a new section as it was introduced two years back in the Budget 2016. Then why is it being discussed now? Well, this section has become more important from this year because of the two recent moves of the I-T Department.

Firstly, the department has recently issued a cautionary advisory to all the salaried taxpayers who will be filing the IT returns for FY17-18 to report their income correctly. This move has apparently been taken in order to stop all the malpractices which are being resorted to by the salaried taxpayers in order to evade tax.

Secondly, the department has also come up with the changes in the ITR Form 1 (Sahaj) for FY17-18 which now seeks specific and complete details of your salary and house property income. Earlier, such details were not required; only the total figure was to be disclosed.

Now, let’s understand that what exactly is under-reporting or misreporting of income and how much penalty would be levied in such cases.

“As per Section 270A, if any person under-reports or misreports his income, then an assessing officer (AO), a commissioner (appeals), a principal commissioner or a commissioner may direct him to pay penalty in addition to the tax, if any, on such income. This penalty is to be paid over and above the taxes,” says CA Abhishek Soni, Founder, tax2win.in.

Under reporting of income can be based on various circumstances. Like, if the income of a person exceeds the basic exemption limit, but still he does not file a return, then it will be considered as a case of under-reporting. However, “the cases of misreporting of income as defined in the Income Tax Act are misrepresentation or suppression of information; failure to record investments in the books; claim of expenditure without any evidence; recording of false entry in the books, failure to record receipt in books which is having effect on total income; and failure to report any international transaction or deemed to be an international transaction,” says Soni.

What is the penalty?

If the under-reporting of income is on account of misreporting of income, then the penalty shall be leviable at the rate of 200% of the tax payable on such under-reported income. However, if it is due to any other circumstances, then the penalty shall be 50% of tax payable on under-reported income.

For example, “if your income is, say, Rs 15,00,000, i.e. you are in the 30% tax bracket, and have under-reported an income of Rs 2 lakh in ITR, then the AO can impose a penalty of up to about Rs 30,000 (50% of the tax on under-reported income, i.e., Rs 60,000 (200000*30%)). However, if the under-reporting is due to misreporting of income, then penalty can be up to 200% of the tax on unreported income, i.e. 200% of Rs 60,000, amounting to Rs 1,20,000,” says Soni.

However, an assessee may apply to the AO with explanation that why under-reporting or misreporting occurred. If satisfied, then the AO may not penalise the assessee or may reduce the quantum of penalty.

Therefore, from this year onwards you must be extra careful while filing your income tax return for FY 17-18, and disclose all your incomes under the respective heads. Otherwise, you may have to pay penalty u/s 270A for under-reporting or misreporting of your income along with the applicable taxes. So, be vigilant and file your IT return correctly.

Source by financialexpress.

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