In India, generally, every company or a firm or any other person having taxable income, is required to file its tax return with the Indian tax authorities on or before the due date, in prescribed form(s) electronically with subject to certain exemptions.
The income tax form(s) have set format and any additional information by way of note, etc. cannot be electronically filed with such form. The income tax return forms are like self-declaration of the income earned by a taxpayer in a particular financial year. The due dates for filing income tax return are as follows:
|
Taxpayer |
Due Date of filing Income Tax Return |
|
30th September |
|
30th September |
|
30th November |
|
31st July |
** For the Assessment Year 2020-21, owing to COVID-19 situation and lockdown, the due date for filing tax return for the taxpayers mentioned at serial no. a, b, and d above has been extended to November 30, 2020.
With effect from AY 2020-21, exemption from filing income tax return, available to a non-resident whose income consist only of interest and dividend, has been extended to non-residents whose taxable income includes royalty or fee for technical services as well, on which tax has been deducted at source at the rates mentioned in the Indian Income-tax Act.
In case the income tax return is filed after due date but on or before 31st December, a fee of Rs. 5,000 will have to be paid and fee of Rs. 10,000 if tax return is filed after 31st December. The voluntary income tax return for any financial year can be filed until the end of the relevant assessment year [for example, for financial year 2019-20 (1st April 2019 to 31st March 2020), voluntary income tax return can be filed until 31stMarch 2021].
It is worth mentioning that the taxpayers are also required to estimate income and pay quarterly taxes on the income earned or to be earned, during a financial year, by way of advance tax, i.e. before the end of financial year. Generally, in the case of salaried personal tax liability is covered by taxes withheld at source by the employer, as such there is no need for them to pay advance tax unless they have income from other sources. Further, there is an exemption from payment of advance tax, where the tax payable, after reducing withholding tax, is less than Rs.10,000 in a financial year.
In the event advance tax paid and tax withheld on the income falls short of 90 percent of total tax liability, a taxpayer is liable to interest. Further, interest is also payable in case of short fall in the instalments of advance tax.
The income tax return filed is electronically processed. The manner of processing involves-: (a) computation of income after making adjustment, if any, for arithmetical error, incorrect claim apparent from tax return form, disallowance of expenditure indicated in audit report, etc., (b) computation of tax, interest and fee, (c) determination of refund/ sum payable after adjustment of tax, interest and fee. No adjustment pursuant to such processing is made without informing the taxpayer.
The income of a taxpayer may further be scrutinized/ assessed by the Indian income tax authorities. Also, adjustments made by income tax authorities may in certain cases, lead to initiation of penalty proceedings.
The penal provisions under the Indian tax law have undergone a significant change effective for assessment for assessment years commencing on or after AY 2017-18. In terms of the amended provisions, in case the assessed income is greater than the income as per the tax return electronically processed as mentioned above, then the differential would be the under-reported income of taxpayer, liable to penalty. In case where tax return is not filed, the income assessed would be the under-reported income, liable to penalty.
The following will not be considered as under-reported income for the purpose of levy of penalty-:
Income for which bonafide explanation is offered by the taxpayer and all relevant facts in support of such explanation are given to the satisfaction of tax authorities,
Where the addition/ disallowance made by tax authorities is on the basis of estimates and the books of accounts of assessee have not been rejected,
Where the assesseehas suomotu made addition/ disallowance based on certain estimates but the tax authorities estimatehigher addition/ disallowance,
In respect of transfer pricing addition, where assessee maintains documentation in accordance with the requirements of law, declares all International transactions and discloses all material facts thereto.
Penalty levied in the cases where search has been initiated, since it is covered under separate provisions of the Indian tax law.
Penalty is to be levied at the flat rate of 50% of tax payable on under-reported income and 200% of tax payable where under-reporting is because of mis-reporting of income. The cases where under-reporting will be considered as mis-reporting are as follows:
Misrepresentation or suppression of facts;
Non-recording of investments in books of accounts;
Claim of expenditure not substantiated by any evidence;
Recording of false entry in books of accounts;
Failure to record any receipt in books of accounts having a bearing on total income; and
Failure to report any international transaction/deemed international transaction under relevant provisions of the Indian tax law.
It is relevant to mention here that as per the extant provisions of the Indian tax law, in case where no return of income is filed by the taxpayer, there is no provision to reduce the amount of taxes paid (i.e. withholding tax, advance tax, etc.) while determining tax on under-reported income. As such, penalty is computed at the rate of 50%/ 200% of tax payable on the under-reported/ mis-reported income, being the income assessed by the income tax authorities. Further, non-filing of income tax return may also attract prosecution in certain cases.
A new provision with regard to waiver of penalty has also been introduced in the Indian tax law, wherein waiver from penalty is granted if the tax and interest as per the order of assessment is paid within the prescribed time limit and such order is not contested before appellate authorities. Such waiver, however, is not available in the cases where penalty is levied because of mis-reporting of income.
