Income tax inevitably has to be deposited in the government’s exchequer. This implies that auditable companies and limited liability partnership firms should file their tax returns well before the deadline (it happened to be 30th September for AY 2017-18). Deviations or deliberate delay in filing can land your firm in serious trouble. Vital income tax return lesson plansprepared from 5 real-life lessons can help you chalk out advance strategies for averting any penalties.
Lesson 1: Avoid Loss of Interest Due on Refund Because of Late Filing
If non-exercise of due diligence on your part has resulted in delayed IT return filing, you stand to lose significant money in terms of interest on the refund. Suppose your firm is entitled to receive a sum of INR 1,00,000 as interest on the refund due. Then, the number of days by which you had deferred the filing would be factored in by IT department for correspondingly reducing the interest pay-out.
To avoid the loss of interest on your tax refund due to late filing, it’s essential to file your income tax return on time. The interest on refunds typically starts accruing from the original due date of the return, and any delay in filing can result in a loss of that interest. To prevent this, make sure you gather all the necessary documents, complete your return accurately and file it by the deadline. Filing electronically can also expedite the process. Timely filing ensures you receive your refund promptly and avoid any potential loss of interest due to late filing.
Lesson 2: Avoid Imposition of Penalty by Assessing Officer
The Assessment Officer of your area should be convinced about the authenticity of income reported through your e-filing. If any discrepancies surface up during scrutiny, you are liable for a discretionary fine by the officer based on the quantum of deemed financial offense. One of the important income tax return lesson plans is to religiously cross-check each and every posting in the return being filed. In real life, such penalties have been imposed on companies just because some silly mistakes had crept in due to inattentiveness.
To prevent errors or discrepancies, all financial records should be reviewed carefully –Â income sources and deductions. You must also keep all supporting documents and receipts as evidence of your claims. By filing your return before the due date, you demonstrate your compliance with tax regulations and reduce the likelihood of penalties. If you have any doubts or complex tax situations, you must consider seeking professional advice or assistance to ensure your return is prepared correctly and in accordance with applicable tax laws.
Lesson 3: Get your LLP Compulsorily Audited if Turnover Exceeds Set Limit
If your firm has been set up under Limited Liability Partnership Act of 2008 and your annual turnover exceeds INR 40 lakhs in the bygone financial year, you have to mandatorily get your books of account audited. An audit involves an independent examination of your LLP’s financial records, statements, and transactions to ensure their accuracy and compliance with accounting standards. The audit assures stakeholders, like business partners, creditors, and investors, about the financial health and integrity of the LLP. Failing to comply with the audit requirement can result in penalties, legal consequences, and damage to the LLP’s reputation. Therefore, all businesses must adhere to the auditing obligations if your LLP’s turnover exceeds the specified limit. While filing income tax returns, the audit report has to be necessarily displayed through Form 3CA. If Form 3CA is not furnished, your firm cannot claim exemptions available. Some firms which try to misrepresent their revenues have to shell out hefty fines.
Lesson 4: Respect the Tax Demand Notice
If you have received a tax demand notice from the assessment officer, you need to treat it with the utmost professional respect. If the notice contains an amount that you feel overblown or unjustifiably calculated, you can contest the same by logging into the e-filing portal. The stipulated time period is 30 days from the date of issuance of the notice. If the claim made is tenable, you should infallibly pay the remaining tax within a month. Many real-life examples are present wherein defaulting on tax payment has led to incurring of severe penalties.
Lesson 5: Always Pay the Dividend Distribution Tax
As a prospering organization, your company has remitted dividends to all loyal shareholders. However, you have to necessarily pay dividend distribution tax in adherence to Section 115-O for the amount distributed in the form of dividends.
Paying the DDT is important to fulfill the tax obligations of the business and avoid any penalties or legal consequences. Non-payment or underpayment of DDT can lead to scrutiny by tax authorities and may result in additional taxes, interest, and penalties. By promptly paying the DDT, companies ensure compliance with tax laws and maintain good standing with tax authorities. It also helps maintain transparency and trust with shareholders, as they receive dividends without any tax liabilities.
Conclusion: Always Take your Income Tax Return Lesson Plans Seriously
Taxes provide the sustenance needed to run the nation. You need to steadfastly comply with the income tax return filing norms to steer clear of any unwanted penalties. This calls for learning from real life lessons of tax mishaps. Pay your taxes and take your organization to newer heights of success seamlessly.
