Fill all income details correctly in tax return

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Due to the tightening of tax regulations, more and more transactions are now coming under the scanner. In order to curb the circulation of black money and widen the tax base, the government has recently notified changes in the monetary limits that will require mandatory quoting of permanent account number (PAN). From April, the conditions related to high value transactions and their reporting will also undergo a change. All these new developments will have several implications on individual taxpayers.

High value transactions

The coverage of various transactions and their monitoring by the income tax department involve a clear monetary angle as the attention here is on high value transactions. Not just a single high value transaction, even multiple transactions are likely to attract the attention of tax authorities. There is a structure that is now being put in place whereby an individual can be tracked on the basis of the various expenses and investments he/she undertakes.

Linking everything with PAN will give an idea about the amount of money that is available with an individual.

Tracking cash

Earlier, the tax department could only track the transactions coming through the banking channel. So, it didn’t matter if one dealt in cash. The recent developments in the tax department are specifically aimed at getting access to the expenses and investments made by an individual in cash. A start has already been made with respect to the tracking of individual cash transactions, which is only going to get stricter and wider in scope as the time progresses.

Matching

Taxpayers also need to understand that they will not face any trouble just because they have made a few high-level expenses or if some of their transactions come under the tax department’s scanner. If they have produced all the necessary details in their tax returns, it would not cause any trouble because the income and the expense columns would effectively be in balance. However, if a taxpayer’s expense becomes more than the income shown, there is a good chance that the income tax department will demand an explanation.

Channalising efforts

A taxpayer should not waste time and energy to avoid the limits after which there will be a disclosure of transaction details to the tax department.

This would mean undertaking lots of efforts that would split up the expenses or the investments and lead to further administrative steps. The same endeavour could be directed towards ensuring that all the details are correctly mentioned in the tax return.

(The writer is a chartered accountant and a financial planner)

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