Why are you taxed?

Under the Indian Taxation policy, direct tax (income tax) on income generated by you or your business is taxable at respective tax rates. Indirect taxes (GST) are charged on goods and services purchased by you and is collected by the provider of that good or service on your behalf. 

People who are exempted from paying tax 

Tax filing is a compulsory process for almost all taxpayers with a few exemptions, which are as follows: 

  1. Taxpayers aged 80 or above do not need to file an income tax return. 
  2. Taxpayers with an annual income of less than Rs.5 lakhs and not claiming a refund also do not have to file for income tax returns.

It is compulsory for all others to file an Income Tax Return. The due date to file ITR is 31 July following the concerned financial year.

Penalties of delay in ITR filing

Some disadvantages of missing the deadline are:

  1. A penalty of up to Rs.10,000 under section 234F
  2. Levy of interest on Taxes due as on 31 July under section 234A
  3. Difficulty in Home Loans approval
  4. Delay in refund claim processing (if any)
  5. Denial of loss carry forwarding to future years (exemption on house property losses.)

Filing Income tax is possible through e-filing.

Tax Saving 

The government encourages some tax deduction avenues which are discussed below:

A. Home Ownership

  • Stamp Duty and Registration under Section 80C – Rs.1,50,000 within the overall limit of Section 80C
  • Deduction on Home loan interest under Section 24. – Not capped (but full disclosure of rental income in ITR, Maximum Loss from house property capped at Rs.2 lakhs.)
  • Reduction in Tax for first-time homeowners with certain conditions under section 80EE.

B. Home Renting Allowance (HRA)

  • House Renting Allowance is provided to all salaried professionals who rent a house under Section 80GG.

C. Health

  • Life insurance premium under section 80C
  • Medical insurance and preventive health check under section 80D

D. Other Long-term avenues

A significant amount of tax payable could be saved by planning your tax liabilities under section 80CCD (1) and 80CCD(1B) a total deduction of Rs.2 Lakhs from your taxable income. The total amount of tax saved would come up to Rs.62,280 (46800+15480). 

Tax Notice 

A Tax notice is a form of formal communication between a taxpayer and the Income Tax department. It is not necessary that a notice is regarding a penalty or scrutiny, it might be a simple rebate grant letter. 

The following aspects are possible reasons for a tax notice:

  • TDS mismatch 
  • Difference in Return filed 
  • Additional documentation requirements 
  • Tax returns not filed notice 
  • Investments in the name of Spouse or children 
  • High-Value Transaction 
  • Non-disclosure of assets for wealth Tax 
  • Random Scrutiny