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Disclose tax free income on different investments when filing income tax return

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Disclose tax free income on different investments when filing income tax return
Tax-free income earned on different financial instruments has also to be shown while filing income tax returns. Likewise as required by the Income Tax Act, any income earned on mutual funds which also in most of the cases is tax-free has to be shown infact in the tax-exempt category.

And the disclosure of such an income which does not attracts the liability to pay tax or is exempt from tax is required in case the assessees income exceeds the basic exemption limit. And if not disclosed you can be severely treated for your negligence on the issue as both taxable and exempt income has to be disclosed. Even the income on which tax has been deducted at source is also to be filed in the return regardless of the fact it attracts further tax liability or not.

 

Why the disclosure is crucial?

 

The disclosure of such an tax-exempt income or an income from which tax has been paid off to the government through deduction at source is required as your income source as well as quantum of income has to be clearly represented in the income return whether or not it attracts. There is a separate column in the return to specify tax-exempt income.

Consider a case, when you disclose a total of Rs. 7.5 lakhs in your income tax return in the financial year and make investment worth Rs. 30 lakhs in a property out of the long term capital gains you realized from investment in equity funds, which being tax exempt not disclosed by you. In such a case, you can be put to a stringent scrutiny by the income tax department. And such an exercise can be harassing and cumbersome for you as minutest of details have to be sometimes provided to complete the formalities of the income tax dept. even though no penalty shall be levied for non-disclosing such an income.

So, all such incomes including capital gains or losses, interest earned on EPF or PPF investment, dividend income which is tax free in tha hands of investor should all be disclosed without fail.

GoodReturns.in

Story first published: Saturday, April 26, 2014, 10:49 [IST]
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