Income Tax Return (ITR) filing: Avoid these mistakes, else penalty amount is waiting for you

The Income Tax department levies various penalties on taxpayers on the basis of various defaults committed. According to the information given on the website of the income tax department, some of these penalties are mandatory while others are at the discretion of the tax authorities. Rules under section 234F of the Income Tax Act were also changed which came into effect from April 1, 2017. As per the new rules, if you had filed your ITR post the deadline of August 31, 2018, you will be liable to pay a maximum penalty of Rs 10,000. 

In what cases the penalties are levied by Income Tax department?

- Penalty for default in making payment of Self Assessment Tax - As per section 140A(1) any tax due (after allowing credit for TDS, advance tax, etc.) along with interest and fee should be paid before filing the return of income. Tax paid as per section 140A(1) is called ‘self assessment tax’.

- As per section 140A(3), if a person fails to pay either wholly or partly self assessment tax or, interest, or fee then he will be treated as assessee in default in respect of unpaid amount. 

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- As per section 221(1), if a taxpayer is treated as an assessee in default, then he shall be held liable to pay penalty of such amount as the Assessing Officer may impose and in the case of a continuing default, such further amount or amounts as the assessing officer may, from time to time, direct. However, the total amount of penalty cannot exceed the amount of tax in arrears.

- Before charging penalty under section 221(1), the tax authority shall give the taxpayer a reasonable opportunity of being heard. No penalty is levied if the taxpayer proves to the satisfaction of the tax authorities that the default was for good and sufficient reason.

What are the penalties levied?

If an assessee fails to furnish return of income within due date as prescribed under section 139(1) then as per section 234F, he will be required to pay fee of:-

a) Rs 5000 if return is furnished on or before 31 December of assessment year.

b) Rs 10,000 in any other case.

However, if total income of the person does not exceeds Rs. 5 lakh then fee payable shall be Rs 1000.

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How to avoid mistakes?

Saraswathi Kasturirangan, partner, Deloitte India told Zee Business Online, "At the outset, tax returns need to be prepared and filed in a diligent manner, ensuring that all taxable income is disclosed correctly. A review of the bank statements and other investment related documents should enable the tax payer to identify all taxable incomes,"

She said that salaried taxpayers should match their income with Form 16 issued by the employer. 

"If the employee has been with multiple employers, salary income from both the employers should be considered," she said, while adding that any deductions (e.g. donations) claimed in the tax return should be suitably supported. "It is prudent to download the Form 26AS from the income tax website to confirm that there is no mismatch or miss out of income," Kasturirangan said. 

Apart from this, disclosure under the Assets and Liability Schedule of the tax return form should be given due importance where the taxable income is Rs 50 Lakhs and above. "Disclosure of overseas assets is required for individuals who are Resident and Ordinarily Resident in India," she said.