Acting Tough against Non Filers of Income Tax Returns

 

Section 139 (1) (b) of the Income-tax Act, 1961 provides that in case of a person other than company or Firm, Return of income is required to be filed if total income exceeds basic exemption limit. Seventh proviso to section 139 (1) empowers the CBDT to lay down certain additional criteria which would trigger requirement of filing of the return even if total income does not exceed basic exemption limit.

There are many citizens who carry out significant amounts of financial transactions but are not filing income tax returns as the income is below the basic exemption limit. Various notices have been issued for the last 6 years to numerous taxpayers who have carried out high value transactions but didn’t file the income tax returns. Acting tough against such taxpayers, CBDT has now further announced certain additional categories of the person who will be required to file the income tax return even if their income is below the basic exemption limit or even if there is a loss. CBDT has issued Notification No. 37/2022 dated April, 21^st, 2022 for widening the tax net through Rule 12AB. Now, the following categories of person will be mandatorily required to file the income tax returns irrespective of their profit or loss:

1. Person whose total sales, turnover or gross receipts in the business exceeds Rs.60 Lakh;

2.  Person whose total gross receipts in profession exceeds Rs.10 Lakh;

3. Person for whom the aggregate of tax deducted at source (TDS) and tax collected at source (TCS) during the previous year, is Rs. 25,000 or more for person of the age of less than sixty years;

4. Person for whom the aggregate of tax deducted at source (TDS) and tax collected at source (TCS) during the previous year, is Rs. 50,000 or more for person of the age of sixty years or more;

5. Person with aggregate of deposit in one or more savings bank accounts of Rs.50 Lakh or more.

Apart from above, there are following categories of the taxpayers who are required to file income tax return mandatorily irrespective of the profit or loss of such person:

1. Deposit of Rs. 1 crores or more in one or more current accounts with a banking company or co-operative bank.

2. Expenditure of Rs. 2 Lakhs or more on foreign travel expenses either for himself or for any other person.

3. Expenditure of Rs. 1 lakh or more towards consumption of electricity.

Other Measures to ensures regular filing of income tax returns by the Taxpayers:

There are various other provisions which have made the return mandatory to avail the benefit of deductions or concessions under the Income Tax law.

1. A company and a firm are required to file the income tax return even if there is no income or even if they are not carrying out any business activity.

2.  The societies shall be available to get the benefit of deduction under section 80P only if the income tax return is filed within the due date.

3. There are various deductions & exemptions under Chapter VIA or Chapter III which is available only if the income tax return is filed by the taxpayers. Similarly, persons whose income below claiming capital gain exemption u/s , 54F, 54D, etc is above the basic exemption limit are also mandatorily required to file the income tax return.

Higher Rate of TDS:
Payer of income is also required to verify whether the recipient/ deductee (purchaser/buyer) has filed the income tax return or not. The higher Rate of TDS / TCS has been provided for Non-Filers of Income Tax Return under section 206AB & Section 206CCA.
A person who has not filed its return of income for one preceding year & if the amount of TCS / TDS is Rs. 50,000 or more in the said previous year then such person would be subject to higher rate of TDS/TCS. Now, the taxpayer would be required to ensure the filing of income tax return within the due date u/s 139(1) so as to avoid higher rate of TDS/TCS. TDS rate in cases of such non-filers shall be the higher of the following:
(a)  At twice the rate specified in the relevant provision of the Act; or
(b)  At twice the rate or rates in force; or
(c)  At the rate of 5%.

[It may be noted that a higher rate of TDS @ 20% is there if the PAN is not provided by the deductee to the deductor. The provisions of section 206AB are presently not applicable in relation to transactions on which TDS is to be done u/s 192, 192A, 194B, 194BB, 194LBC, or 194N. This provision is not applicable on payment to a non-resident who does not have a permanent PE in India. Further, to reduce the compliance burden on individuals or HUF liable to do TDS without TAN, an amendment has been done in section 206AB to provide that TDS at higher rates u/s 206AB shall not be applicable in the case of section 194-IA (TDS on property), 194-IB (TDS on Rent), and 194M (TDS on payment to contractor/ professional for personal expenses)]

[How to verify whether the person has filed an Income Tax Return or not?– A utility has been provided at the income tax portal to verify whether the person is filing income tax return or not.

Conclusion:

The flow of information in the database of the income tax department is on the rise. There are multiple checks and controls which are introduced in the IT system to keep a track of high value transactions. The only way to avoid the rigour of income tax law is to comply with it in true and honest spirit.

 [Readers may forward their feedback & queries at nareshjakhotia@gmail.com. Other articles & response to queries are available at www.theTAXtalk.com]