Hello,
I'm just trying to understand the process of Income Tax in India. I've a few queries for which I could not find clear answers anywhere. So, posting this message. Please answer each of the questions. Thanks in advance.
1) What is after all 'Income Tax Return' ? I've seen many people/sites saying 'You have to file.... It is obligatory... You have to fill one of the ITR forms... etc.'. But it is not clearly explained anywhere I saw, what is IT return in the first place, and why does one need to file it ?
2) What happens if one pays the tax, either on his own, or via TDS, but does not file a return ? I'm not expecting the legal implications, but want to know what actually happens. I mean, if one avoids paying the tax, what happens is that the Government would not have money to carry out its various activities. Because of this, it might have been made legal to pay taxes. That is clear. But what happens if one avoids filing the IT return ? Does the Goverment or somebody lose something, even though the tax itself is paid ?
3) Is paying tax more of a personal responsibility ? For instance, let us say, one gets some Rs. 2 lakhs as a capital gain by selling some property. Now, what if he does not declare this income, and thus avoids paying the tax on this amount ? Or let us say, one has some 5 houses, and he gets a total rent of around Rs. 1 lakh every month from all those houses. What if such a person ignores declaring this income and thereby avoids paying the tax on it ?
4) This question is a bit more specific. I just came to know that banks deduct the tax on interest on the fixed deposits, if the interest from all the deposits in that branch, in that FY, is greater than Rs. 10,000. I also read that banks deduct the tax at the time of paying it to the customer, and also at the end of the FY. This part is not clear. Please clarify for the following example. One opens a fixed deposit of Rs.2 lakh for 1 year, at the interest rate 8% with a bank, in the month of July 2009.
4a) Now, does the bank deduct the tax twice - on 31 Mar 2010 (FY end), and also in July 2010 (at the time of paying the interest) ? If it does deduct twice, how much will be deducted each time, and will it give Form 16 A twice ?
4b) Will this interest be again taxed (other than the 10% tax deducted by the bank) finally when combined with other taxable incomes, at the time of filing ? Let us say the total taxable income is Rs. 3 lakh (so that 30% tax rate is applicable). Now, is not the interest supposed to be taxed at 30% ? Then, how come 10% TDS rate applies ? OR, will the interest be taxed again (at the time of filing IT returns) at 20%, since 10% is already taxed ?
4c) When banks deduct 10% on the interest, does it mean 10% on the total interest, OR 10% on (total interest minus 10,000) ?
CAclubindia
