H. Should I have to file the return even if all the tax is deducted at source (TDS) by the employer?
Yes. Income tax return has to be filed even if the tax is already deducted at source by the employer. Income earned by the assessee from various sources has to be reported while filing the income tax return. The deductor of income tax is not aware of your income from various sources.
Most of the time the employer is informed only about the rental income or the interest on housing loan, but never informed about the following transactions –
Employee if active in trading in shares and securities, the gain or loss is not reported to the employer
Employee selling any property and resulting gain or loss is not reported to the employer
Interest derived from deposits is not reported to the employer
Income derived from earlier employment is not reported to present employer.
So, the tax deducted by the employer is only based on the income reported. In cases where there is more than one form 16, the present employer may not consider the income earned from earlier employment while calculating the tax liability even if it is reported by the employee.
Also, the tax deducted by the bank on interest earned is just 10% and if the employee is in higher slab rate, the differential tax is not paid if the income tax return is not filed.
Point to remember is the entity deducting the tax from your income is not aware of your total income derived from various sources to calculate the correct tax liability hence they deduct the tax only to the extent of the income derived from these entities.
More often by not or belated filing of the income tax return, the assessee is losing out on –
Not claiming as refund the excess tax paid over the tax liability.
The benefit of set-off of loss of the current year in the subsequent year is not available if the income tax return is not filed within the due date.
The impact is more if the current year profit results in higher tax bracket and benefit of set off of the loss of earlier years could not be availed due to non- filing or belated filing.
I. Can Income-tax Authorities take action against the non-filing of Income tax return?
Yes. Income tax authorities are empowered to initiate action against non-filers. There are provisions in Income tax act which are invoked and taxpayers do get notice of prosecution. There is a provision in the income tax act which provides for rigorous imprisonment of 7 years.
J. If my tax deducted at source is more than the tax liability, Will I get the entire excess tax paid as a refund?
In general, the refund is given to the extent of the credit available. The tax deducted by various entities should reflect as a credit against your PAN. If the tax deducted as specified in your income tax return matches with the credit available, the refund will be given. Else, a notice or intimation is sent citing the discrepancy between what is claimed and what is available against your PAN. Hence it is not necessary that the refund claimed will always be the refund given by the department.
Remember, the refund can be claimed only by filing the Income tax return.
Every deductor of tax is obligated to –
Pay the tax deducted to the Government
Provide information on the income earned by the deductee and the tax deducted
Provide information on the income earned but no tax is deducted if 15G/H is given
Once the deductor files the information it will reflect as a credit against the deductee PAN. This can be viewed through Form 26AS.
It is better to check form 26AS regarding the tax credit available before filing the income tax return.
K. What is the alternative if the tax is deducted at source but not reflecting in Form 26AS?
The reasons for this may be non-filing of information by deductor, non- payment of tax by the deductor, incorrect PAN mentioned by the deductor for tax not reflecting in 26AS.
The assessee has to approach the deductor and ensure that it is reflecting. The onus is on the assessee to get the tax reflected against his or her PAN.
Ignorance is no longer a bliss. Government is making every effort to remind the taxpayers through their registered mobile number and e-mail address in general on the due date for filing, due date for payment of advance tax and in specific the status of your income tax return, the total tax deducted against your PAN etc,
The taxpayer or the assessee can no longer take “Ignorance” as a shelter if notice is served. Hence it is better to file the income tax return and be clean than responding to notices.
– by Prakash Anantharaman