It's still not too late to file tax returns
It’s worth taking the time to put your papers in order, even if you’ve missed the deadline. And also learn why you must file tax returns.
By Bella Jaisinghani, TNN |
| RUSH HOUR: Indian taxpayers fill in their income tax returns at a special income tax filing facility at Pragati Maidan in New Delhi, July 29, 2007. There was a last minute rush to file income tax returns with a deadline of July 31. |
Shehnaz Pardiwalla is slowly beginning to recover from the nightmare of the past fortnight. The young chartered accountant had lost her appetite and foregone sleep in the run-up to the July 31 deadline for filing income tax returns. Not that her personal papers were not in order. It is just that CAs like Pardiwalla dread this time of year when they must deal with disorganised clients who do not understand the significance of filing.
Yes, we know the deadline is over, but admit it! You had happily shoved the three-letter-word into a memory recess and haven’t yet filed. Well, it’s not too late. You can file the return till March 31, 2008, without attracting any penalty as long as you don’t have any outstanding tax to be paid. That means, salaried people need not worry as their taxes are deducted at source. However , if you have other sources of income, you will have to pay 1% per month on the outstanding tax liability.
| TAX RESOLUTIONS The tax professional's wishlist for individual tax payees and companies that employ them: Maintain details of bank deposits and withdrawals Record sales details of shares and acquisitions It is incorrect to believe that all mutual fund redemptions are not taxable. Some are Keep records of investments made in PPF, NSC and LIC Proper vouchers must be prepared of all expenses. You cannot brush them off as miscellaneous expenditure Companies can help by issuing salary certificates in advance so employees can beat the last-minute rush |
And, your reason to file taxes is not just to add more paperwork in a government department that you scarcely care about. It’s because having your financials on record come in handy, even for things like applying for a foreign visa.
Yet, year after year, it’s the same old story. People do not organise their salary certificate, bank statements and investment details in time for the big day. One can imagine the plight of the CA who must first send out repeat reminders of the approaching deadline to a hundred-odd clients, draw out individual checklists of required documents, and then go through them with a magnifying glass to see if they are in order.
Interestingly, it is people in the 35-40 age bracket, holding well-placed jobs who are often the most financially dysfunctional. They are more careless—or simply truant—as compared to the previous generation. The rise in disposable income means that wellpaid youngsters, even if they are starting out in life, do not need to prepare a budget or keep track of their expenses . Naturally then, bank statements and other documents are carelessly put away somewhere the minute they arrive.
It is only when the person needs to file his returns in July that they are hurriedly assembled.
Yet, year after year, it’s the same old story. People do not organise their salary certificate, bank statements and investment details in time for the big day. One can imagine the plight of the CA who must first send out repeat reminders of the approaching deadline to a hundred-odd clients, draw out individual checklists of required documents, and then go through them with a magnifying glass to see if they are in order.
Interestingly, it is people in the 35-40 age bracket, holding well-placed jobs who are often the most financially dysfunctional. They are more careless—or simply truant—as compared to the previous generation. The rise in disposable income means that wellpaid youngsters, even if they are starting out in life, do not need to prepare a budget or keep track of their expenses . Naturally then, bank statements and other documents are carelessly put away somewhere the minute they arrive.
It is only when the person needs to file his returns in July that they are hurriedly assembled.
“High-powered , salaried executives working in banks and multinational corporations tend to be careless in matters related to IT returns. Ironically , they are the ones who are more aware of the July 31 deadline than most other professionals. It remains on their to-do list for weeks, and at the last minute, they end up scrambling for papers. Their parents, meanwhile, may not even fall under the tax bracket but come well in time with meticulously-kept documents,” says Pardiwalla . “In fact, an elderly client requested me to persuade her son to file his returns lest he miss the deadline.”
She acknowledges that part of the problem with younger clients lies in the easy familiarity that enters the relationship over a period of time. “I start sending out reminders by way of text message many days in advance, but the same well-meaning people who had earnestly promised to reform themselves the previous year, end up defaulting each time,” she says. Clients these days do not even manage to make time to visit their tax consultant , so they despatch and receive documents via courier.
As if the regular rigmarole were not enough, the return form was not so ‘Saral’ anymore. “This year there are four different forms for various categories for individuals to choose from, and for the layman it is hard to distinguish which one is applicable. For instance, ITR 1 is for people with income from salary, pension and interest , whilst ITR 2 is for people not having income from business or profession ,” says financial consultant Sujata Kabraji.
Small wonder that she has had clients frantically calling her to ask what the difference between these are. One hapless client who was leaving on a business trip tried to download the form from the internet. Since it was late at night he hesitated to call. Faced with four choices of forms and unable to distinguish which one applied to him, he printed all four, signed them, and left them with his wife to go figure!
Some clients rush to their financial planners this time of year after having made a preliminary visit to their CA. “They suddenly realise they have not made their investments and expect us to do it for them around June or July,” says Kabraji. “I recently had a tough time explaining to one of my clients, a budding media personality, that he had to make his investments by March 31 even though he could file his returns by October 31 because he is a professional. He actually believed that he could invest until the date of filing returns, not realising that the financial year ends in March.”
A young media professional recalls the time she dispatched copies of her credit card statements instead of her bank statements to her CA. “It was an honest mistake,” she says. “I was as surprised as she was to discover I had done that.” There are times Pardiwalla has had to seek clarifications regarding certain entries in bank statements, but her clients have no idea where she is reading the figures from. Then they suddenly remember having made an impulse purchase involving a big sum of money.
Get-rich-quick schemes are particularly attractive to Gen Next, so they tend to forget a few of the many places they may have deposited their money. Arbitrary and off-the-cuff clarifications then come the way of the CA who is fighting to meet a deadline.
In the eternal hope that they will reform, tax professionals have a wishlist not only for their clients but their employees as well. “People should file their investment and bank statements properly every month and be spared the trouble of rushing to look for them in July,” says Pardiwalla. “A number of companies, including the one my husband works for, hand out salary certificates rather late. It is true they have a lot of paperwork to process, but it is imperative to give them Form 16 in time so they can escape the last-minute rush on July 31,” adds Kabraji.
Until then, despite their clients' best intentions, the CAs will be unable to eat their meals on time or get proper sleep once the countdown to the big day begins. Like the captain of the ship, Pardiwalla even avoids filing her personal income tax returns until she has done so for all her clients. Talk about pressure. TNN
WHY YOU MUST FILE TAX RETURNS
Proof of credit worthiness:
Filing your income tax return validates your credit worthiness before financial institutions and makes it possible for you to access many financial benefits such as bank credits.
For getting visa:
Having a copy of your income tax return also comes in handy while seeking a visa to visit a foreign country.
To avoid penalty:
The IT department may ask you to file return of income for earlier years if it finds that you had taxable income in those years. By not filing your return in spite of having taxable income, you will be laying yourself open to the penal and prosecution provisions under the Income-Tax Act.
Even though the July 31 deadline may be past, it is not too late to file your return. A return can be filed at any time before two years from the end of the financial year in which the income was earned. For example, in case of income earned during FY 2006-07 , the belated return can be filed before 31 March 2009.
If the return is not filed before the end of the assessment year, a fine may be levied. If it is not filed even after the end of the assessment year, a penalty is on the cards.
(Source www.incometaxindia.gov.in)
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