Income Tax: TDS deducted but ITR not filed? Here's what professionals need to do

With just 12 days in hand, by now, the taxpayers must have filed income tax return for the financial year 2016-2017, but if you have not then be ready to pay penalty after July 31. 

While there are taxpayers who regularly files income tax return, there are some people who do not take it seriously and delay it.

From a tax perspective, self-employed individuals have to pay taxes on the combined income earned in a financial year from the different clients they have. All earnings, no matter how small, should be added to gross income for the year.

As per the Section 194J of Income Tax Act, employers need to deduct tax deduct at source (TDS) from payments made to professionals. 

This TDS transaction, the employer has to show while filing ITR. But, that is employer side. The point here is, what if when the employer is showing TDS transaction in his/her ITR, but the professional is not filing ITR at all from past few years. 

According to Income Tax Act, currently income tax returns can be filed for only last two assessment years. 

What to do in such cases?

In this case you may not be able to file your tax returns but in order to avoid any notices from the department in future, you can calculate and pay the taxes due by alongwith the interest till date. 

Once you have discharged the taxes due as mentioned earlier you can write a letter to the ITO requesting for condonation of delay and allowing you to file the tax return. This may help you in avoiding the penalties at least.

Chetan Chandak, Head of Tax research, H&R Block India, said, "In case your TDS has been deducted rightfully, and all taxes due have been paid, then you need not file taxes if the returns are now time barred. In case you have time to file belated returns then you must do so but you may have to pay Rs 5,000 penalty for late filing."

Another situation which could happen in such cases, is what if your taxes have been deducted and you have a refund due?  If you are filing the refund after the two years time it will not get processed and department will not issue you the refund cheque. Then does it mean that you will lose this amount altogether? The answer is no; you can still claim the refund in case if it is a significant amount and the return was not filed because of some genuine reasons. 

CA Abhishek Soni, CEO & Co-Founder at Tax2win.in said, "Returns of earlier year cannot be filed now. However, as per the Circular No. 9/2015, application for condonation of delay in filing refund claim can be submitted to the Commissioner of Income Tax (CIT) / Pr.CCsIT/CCsIT) / CBDT. The application is to be made within six years from the end of the relevant assessment year. Thus, application for delay condonation can be filed if the refund amount is substantial. Income tax Authorities will check the case as per the guidelines and will issue the refund accordingly."

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