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Karneeti Part 86
As my TDS is deducted, no need to file Income
Tax Return – A Misunderstanding of Common Man.

Arjuna (Fictional Character): Krishna, Income Tax Department is sending notices to Taxpayers for not filling Returns of last 3-4 years based on TDS, etc. What are they?

Krishna (Fictional Character): Arjuna, Income Tax department send notices to Taxpayers on the basis of information linked with PAN , such as TDS by Banks on FDRs, Mutual Fund transaction, Immovable Property Transactions, Cash Transaction in Saving A/c, Credit Card Transaction etc. Many Taxpayers thinks that there is no need to file Income Tax Return as their TDS is already being deducted on Income earned. It is a big misunderstanding for beginners or common man. If Taxpayer has Taxable Income in any year or if he has Refund to claim then it is necessary for him to file Income Tax Return. Further if a notice is received even after Return is filed then compliance of it should be given. Further Limit of TDS deduction and basic exemption limit for taxable income, both are different. Hence even income is below taxable income, TDS is deducted by the payer and above misunderstanding starts. Further salaried persons also have same understanding, as they feel that on their total salary TDS is deducted, hence all tax is paid, no need to file return, etc.

Arjuna: Krishna, What is relation between Income Tax and TDS?

Krishna: Arjuna, TDS means Tax deducted at Source. According to Income Tax Act, in some specified Transactions like salary, rent, interest, commission, fees, etc, while paying or accounting expenditure, whichever is earlier, TDS have to be deducted and required to be paid to the Government treasury. This means the Payer pays Taxes of the Receiver. E.g. “A” is employee at “B” and his monthly salary is Rs. 60,000 then “B” has to deduct TDS from salary of “A” and required to pay TDS to Government. That means TDS depends on the type of Transaction. But responsibility for filling Income Tax Return lies with the receiver. The receiver Taxpayer has to show all the Income received in Financial Year from Salary, Rent, Interest, etc. in Income Tax Return. After considering all incomes, deductions, etc and after computing the tax if it comes to Income Tax payable then it should be paid or if refund arises then it should be mentioned in return. Taxpayer has to mention the details of TDS Credit received in Income Tax Return. I.e, reconciliation of TDS as per Form 26AS and Income Tax return filed needs to be done. Any mis match may lead to further notice to taxpayer.

Arjuna: Krishna, who should file Income Tax Return?

Krishna: Arjuna, A Person is required to file Income Tax Return if he has Taxable income i.e. his Income is exceeding basic exemption limit (For FY 2014-15 Rs. 2.5 lakhs) even if Tax liability arises or not. If TDS of a person is deducted and Refund arises, same can be claimed, by filing Income Tax Return. E.g. many taxpayers have only income of Interest on deposits. If Interest received is not exceeding Basic Exemption Limit then it is not necessary to file Income Tax Return. But if TDS is deducted on the Interest then he has to file Income Tax Return for getting refund. To save himself from TDS deduction such Taxpayers can file Form 15G or 15H before receiving Income for not deducting TDS.

Arjuna: Krishna, what precautions should one takes before filling Income Tax Return?

Krishna: Arjuna, Every Taxpayer should download 26AS from the Income Tax department’s website. Income and TDS as per 26AS should be verified with the Income Tax Return. Taxpayer may have to face the Department if Income is shown less than the Income shown in 26AS.  

Arjuna: Krishna, if a Taxpayer receives a notice for not filling Income Tax Return, then what should be done?  

Krishna: Arjuna, the Taxpayer has to give Online Compliance if he receives notice for not filling Income Tax Return in this Year and its Status has to be mentioned. The Taxpayer has to mention whether he has filed Income Tax return or not, if he has filed, then he needs to mention the Return filling date, Acknowledgement No., Circle/ Ward and whether online or paper form. If return is not filed then the reason for non-filing is required to be given. Further he has to mention whether the notice received is for his own PAN or for other related PAN. The Taxpayer can file previous year’s returns on the basis of the said notice. If it comes to tax payable then Taxpayer should pay tax and interest, file return and then submit online compliance.

Arjuna: Krishna, What should the Taxpayer learn from the Income Tax Return, TDS and Notice?

Krishna: Arjuna, the responsibility of TDS deduction is of the deductor, Filling of Income Tax Return is of self and to draw notice is of the Department. If a Taxpayer files Income Tax Return correctly then department will not issue notice and no online compliance has to be made. Many taxpayers think that after the TDS is deducted there is no need to File Income Tax Return. A small confusion / misunderstanding in the eyes of law becomes complex in future. Like our health may get damaged, if we don’t pay attention to minor illness. This means Compliance of law and Disease of body should be cured immediately otherwise its effects may create complication in future.    



Published by

CA Umesh Sharma
Category Income Tax   Report

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