One needs to comply with many tax rules that govern the law of the land. The moment you start earning taxable income the penalties start counting mistakes such as non-application of PAN, evasion of income, concealing facts, non-filing of tax returns and the likes. The fear of penalties alone would lead to higher compliance and understanding the penalties involved can help us avoid tax gaffes.
All and sundry are distressed at the thought of an income tax scrutiny or notice. Being caught on the wrong foot with regards to taxes is the last thing on one’s mind. Typically social crimes are kept in curbs using the cuffs of punishments – be it rigorous imprisonment, life sentence or even death penalty under extreme circumstances.
Similarly, there are several income tax wrong doings such as not applying for a permanent account number (PAN), non-payment of taxes in time, failing to file tax returns or swindle income to escape taxes.
What then is the penalty for tax bloopers, which may often be the result of ignorance, if not to concealincome and reduce tax outgo? Let us understand the implications of erring on tax laws.
Lately children have begun earning at an early age, thanks to opportunities on the silver screen. The moment such income earned by the infant crosses the threshold limits notified each year, he needs to file tax returns, for which obtaining a PAN is mandatory. If you fail to apply for a PAN, you can face the music, which can cost as much as Rs. 10,000 in the form of penalty.
After obtaining the PAN, if a person fails to file income tax returns within the deadline – end of the assessment year, then you would be asked to cough up Rs. 5,000 and even be subjected to other forms of punishments. Such non-filers may be subjected to seizure and income tax scrutiny. One also losses out on benefits offered to well-timed tax filings.
Losses can be carried forward only if you file returns on time, while revision of income tax returns too is permitted only for taxpayers, who file good in time.
What forces people to keep paying taxes on time in the country is the 1.25% / 1% interest applicable on the taxes paid beyond the due date. The penal interest is calculated from the day when the tax was overdue and hasn’t been paid. So, if you default on the advance tax payment from the September 2014 quarter, then the interest of 1% is calculated from September 2014 and you would have to pay 1% penal interest for 11 months if you fail to pay advance tax until August 2015.
The taxman can head for your home to feel your collar if he finds that you have evaded income tax by deliberately concealing taxable income. You could be asked to pay upto three times the amount found to be obscure. If tax evasion is detected for one of the returns, then returns of previous years too would come under the microscope.
A false declaration of Form 15 G / H can even land you in imprisonment for a period stretching between three months to seven years.
To avoid fighting for your corner during a tax scrutiny or notice, always take into account the entire set of income earned, through various sources. Often people forget to take into account income on which taxes have already been deducted, bank account interests, total income during a year of job switches, etc.