Income Tax Liability Limit To Get Prosecuted Increased

In the Budget 2019 speech, Finance Minister Nirmala Sitharaman said that the government has proposed certain measures to simplify the tax law to reduce hardships for small taxpayers. One such measure was to increase the threshold limit for tax that could lead to prosecution against a person for non-filing of returns.

The Budget papers proposed to simplify the tax law to reduce genuine hardships to taxpayers by enhancing threshold of tax for launching prosecution for non-filing of returns from Rs. 3,000 to Rs. 10,000, for proceeding against a person.

Section 276CC permits the government to prosecute and imprison a person (non-corporate tax payer) if they have failed to file their income tax returns when they owe tax (beyond allowed limit) to the government on the grounds of tax evasion. The new budget has proposed an increase in the limit of tax evasion liable for prosecution to Rs 10,000, however, some feel that the limit is still very low, considering the intensity of prosecution as an action on non-compliance.

Further, another change introduced is the consideration of self assessment tax along with advance taxes and tax deducted at source (TDS) to arrive at the total tax evaded. During the filing of one's income tax returns, one may find that they are liable to pay some tax after assesement of net tax figure.

Ideally, if you paid of the dues by the end of the assessment year, you will be able to save yourself from prosecution. An assessment year is the year following the financial year for which the ITR is being filed. For example, the AY for FY 2018-19 will be 2019-20. Therefore, the taxes due need to be paid by 31 March 2020.