We often have an inclination to do things honestly and pay-up on taxes that are due. But, sometimes it could be purely the lack of knowledge or an error or mere callousness that could end-up in higher demand tax notice or a notice from the Income Tax Department.
Sometime our errors, acts of omissions (maybe not deliberately) could lead to a notice. Here are a few things to do to avoid getting an Income Tax Notice.
1) Mention Income That Is Also Tax free
Many individuals do not bother mentioning the tax free income. For example, interest income from savings account is tax free to the tune of Rs 10,000.
Many individuals do not mention the same. How is it possible that you may not have earned an interest income from your savings account?
Do mention other tax free income like interest earned from tax free bonds, PPF, dividend from shares etc. It's best to be honest and transparent when you file your tax returns.
2) Mention Gifts Received That could Be Rather Large
Mention gifts that are rather large that you may have received. In India Gift tax is payable and not many individuals are aware of it. They receive large sums in cash as Gifts and fail to be transparent with the tax authorities. This is not acceptable and should never be the case.
3) High Value Transactions
High value Transactions are easily scanned by the Income Tax Authorities in India. Make sure that you mention the same in your income tax returns. For example, you cannot escape a high value transaction like sale of an apartment.
You need to pay capital gains on the same, if you have made a profit on the sale of that apartment. On the other hand a large purchase through credit card etc., are easily scanned by the Income Tax authorities.
4) Approach a Chartered Accountant
Approach a Chartered Accountant or a professional if your returns are likely to be complicated. For example, if you are likely to have profit on sale of assets, a whole lot of other income, gift tax etc., it would be advisable to seek help from a professional.
5) File Your Returns on Time
It's also important to file your returns on time. Not that it would make for lesser or higher scrutiny, it's just that it would help you to make rectifications, if any in your income tax returns.
6) Unnecessarily submitting Form 15G/15H
Try and avoid submitting form 15G/H without a case. These forms have to be only submitted when you believe your income will be below the threshold limit set out for the purpose of paying income tax. At the moment that limit is Rs 2.5 lakhs.
Remember, it's very important to pay your taxes on time and be as honest as you can when paying your taxes. It's easier said then done, but you should strive to do it.
An income tax notice and later clarifications can be a cumbersome and laborious affair. You may have to repeatedly visit the assessing officer and hassle yourself.