The process of filing tax returns is underway for most individuals as the last day is fast approaching. The focus for individuals is to collect all the relevant documents such as the Form 16, TDS certificates and other information which is essential to complete filing of tax returns.
However, an important/critical portion of the Income tax return document which is the information to be provided called the 'Annual information return' (AIR) is given little importance and at times overlooked too.
I-T authority requires you to report certain transactions
The Income Tax authority requires you to report certain transactions which exceed a particular threshold during the financial year. It is only for reporting purposes. The thresholds have been defined. They are:
1. Cash deposits aggregating to Rs. 10 lakh or more in a year in any savings account by you
2. Credit card bill payments aggregating to Rs. 2 lakhs or more in a year
3. Purchase of mutual fund units in any mutual fund scheme aggregating to Rs. 2 lakh or more
4. Payments made for acquiring bonds or debentures issued by a company or institution aggregating to Rs. 5 lakh or more
5. An investment aggregating to Rs. 1 lakh or more for acquiring shares issued by any single company
6. Purchase/sale of immovable property valued at Rs. 30 lakh or more.
Reporting exempt income
This information that the Income tax authorities' are seeking from you, is already available with them as your bank, credit card issuer, Depository Participant and Mutual Fund company would have already provided all details of your transactions to the Income tax authorities'. If your return is picked for scrutiny and the disclosure is not been made, then a penalty will be levied on you.
In addition to this, exempt income is another category of reporting which individuals tend to ignore. The logic being, if not tax needs to be paid on the same, then what purpose does it serve declaring exempt income. While the IT department may not require you to pay tax, they need you to report your exempt income.
Not reporting does not mean that the IT department will not be aware of the exempt income, by virtue of all entities/financial institutions reporting the transactions to the IT department, each and every transactions pertaining to you can be mapped. Hence it is best to report it in order not to attract the attention of the IT department.
Exempt income includes:
Exempt income includes dividend income (shares, mutual fund companies), long term capital gains on which securities transactions tax has been paid and income from agriculture not exceeding Rs. 5,000 among other things.
For the purpose of reporting, both the AIR and exempt income, you need to have all the documents in place such as bank statements, mutual fund statements etc among other things. So make sure you have these documents handy so that you can complete the process of filing returns with ease.
Make sure you complete the return form in every respect so that you do not attract the attention of the IT officer. Who wants their account to be picked for scrutiny? It entails mental stress coupled with paperwork – ensuring all supporting documents are in place.
Source: Economic Times