There are now specific instructions from the income tax department regarding the payment of small amounts of taxes that are raised on the individual taxpayers. There has been a lot of worry for the taxpayers as the computerised central processing unit has been sending lot of them with specific demands that are just for few rupees. Not clear as to whether these needed to be paid or whether they can just be put aside because of the small amount, the taxpayers are confused. Here is a look at the new guidelines that will put this issue at rest.

Actual situation: Individual taxpayers are now increasingly filing their tax returns online and when this is done there is a specific way in which, the entire situation is tackled. The returns that are filed will be processed at the central processing centre at Bangalore, and once the assessment work is complete then the details are cleared and a demand for tax is raised or the refund due is paid. Within this there are lot of cases in which there is a demand being raised by the tax authorities. What sets this situation apart is the fact that the amount of the demand is very low, which can be something like Rs 2 or even Rs 5 or Rs 8, which makes the position of the taxpayer difficult as they could in many cases end up spending more to make the payment as compared to the actual amount of the payment itself.

Collection of details: In fact, the income tax department now says that such a measure of intimating the tax payer about the details of the tax is not actually a demand notice at all. There is an effort underway whereby all the details of the taxpayer is collected and then presented to them at a single place. In such a situation there is a position whereby some small amounts, which could be remaining to be paid due to the small differences that arise at the time of the assessment is shown in the records as being unpaid. Getting details of such a position is meant to be just an intimation to the taxpayer that the overall records of the tax department shows such a situation.

Effective action: There are a couple of ways in which this situation can be tackled by the tax payer. The first position is where the amount of the demand or the amount to be paid to the tax department is less than Rs 100. In such a situation the tax department has said that the amount need not be paid as this is a very small amount that will actually require more effort and cost to pay. Instead the tax department will act on its own, and then adjust future refunds against this small amount so there is actually no step that needs to be taken when the amounts involved are small. On the other hand when the amount that has to be paid is more than Rs 100 then the individual would do well to go and pay the amount and clear the entire situation. This will ensure that there is no amount that has interest charged on to it and hence the dues are settled.

The other position would be where the individual would find that the amount that they have been asked for is actually a wrong figure due to some mistake in the calculation. This position can be either because there is no basis for the demand or that the working of the tax department in not appropriate. In such a situation they should apply for the rectification of the mistake and this will be corrected by the department. Already instructions have been given to the tax officers that in case there are such representations then they need to be considered and tackled.

(The writer is a CA and Certified Financial Planner)