 | « Back to article | Print this article |
If you are making any drastic changes, advises Tinesh Bhasin, make sure there is adequate documentation.
Illustration: Uttam Ghosh/Rediff.com
If you revise income tax returns, there are chances that you could receive an income tax notice to explain the changes.
The Central Board of Direct Taxes (CBDT) has now warned assessees that if they revise income-tax returns, the earlier disclosed income should not drastically change in form, substance or quantum.
The salaried don't need to worry, as the revision they usually make are minor ones.
This might be not including tax-free income such as interest received on money in the savings bank account or if one redeems mutual fund investments, according to experts.
"It's business owners that need to be cautious if they are changing cash in hand or altering sales and profit figures," says Preeti Khurana, a chartered accountant with ClearTax.com
The revision of returns, covered under section 139(5), is meant only if there's a genuine mistake or omission.
If the assessing officer has any reason to believe it's revised to account for undisclosed assets or black money, they can issue a notice to the taxpayer to explain the source of the additional income or assets disclosed in the revised returns.
"If a person is revising his income, he should make sure he has relevant proof for it. Say, if a business owner shows higher sales, he should have supporting documents such as sales tax, value added tax, etc. paid on the sales," says Gautam Nayak, partner, CNK & Associates.
Experts say if the person does not have relevant proof to account for revision, and the changes are significant, it's better to opt for the new Income Disclosure Scheme -- the Pradhan Mantri Garib Kalyan Yojana 2016.
Significant changes would mean an individual shows 30% to 40% more cash than previously stated.
The CBDT has warned if an officer finds any manipulation, the person can face penalty/prosecution.
Tax experts say in most cases, the person would have to pay a stiff penalty of around 85%, as stated in The Taxation Laws (2nd Amendment) Bill.
"They can also put previous years' returns under scrutiny and it can then be a lengthy process," says Khurana.
Revision of income tax is allowed for individuals who have filed their returns by the due date.
The window to file a revised return is open up to one year from end of the relevant assessment year or before the assessment of return by the tax department, whichever is earlier.
Typically, the department sends you an intimation regarding assessment of your return.
If you have filed the return for assessment year 2016-2017 on or before August 5 (this year's due date), you can revise the tax return till March 31, 2018.
Similarly, for assessment year 2015-2016, a person can revise returns by March 31, 2017. The revised returns supersede the earlier one.
To make its demonetisation drive successful, the government has been plugging all the loopholes that black money hoarders can use to avoid paying tax on ill-gotten gains.
Prior to warning assessees on revision of income, it introduced amendments to the I-T Act. The earlier laws allowed taxpayers to voluntarily disclose unaccounted income in the current financial year and pay tax on it.