As per the Income Tax Department, you should self-assess your income and pay tax accordingly. Most of the people believe that income tax return is useless. Hence, they either do not declare income or understate it as it saves some amount of money. Intentionally, if you hide your income from the authorities to reduce your liability, you will face consequences. Such consequences include paying heavy fines or going behind bars. Interest earned on bank fixed deposits or income earned by accepting money in cash also comes under tax evasion.
Methodology
To catch cases of tax evasion, the Income Tax Department uses a Computer-Aided Scrutiny System (CASS) which selects the cases by entering various criteria. If you come under these criteria then the system can select you. This may result in you coming under scrutiny which may lead to trouble. You may be required to submit all the details which include bank account details, property owned by you and your family and details of all the family members living with you. Once the data is collected, the officer will do a mathematical analysis of the income and expenditure to calculate the quantum of tax evasion.
The officer can serve the scrutiny notice within one year from the end of the month in which you file your return. Therefore, if you filed your income tax return on 24 July 2023 for the financial year ending 31 March 2014, you may get a notice on or before 31 July 2015. Notice is a template which includes your name, address. PAN and the year in which it is issued, the time and date when you must appear before the Income Tax Officer. It is not mandatory that the taxpayer has to appear personally before the officer. However, the payer may authorize a representative to represent the case.
Impact of tax evasion
A person who conceals income will be fined and this tax can be up to three times the amount evaded. If you are coming under the purview of the tax department, then there will be no peace in your life. Therefore, it is valid to follow the Income Tax rules and file your return without hiding income. If you try to save a few bucks, you will end up in a situation where the tax officials will keep chasing you, resulting in sleepless nights. You should file returns even if you don't need to because it has other benefits. Because, it is an important document which is worth a lot.
Let us discuss how filing returns helps you in the following ways-
Fulfilling proof requirements:
Pros: Income tax documents are necessary if you apply for loan, insurance policy, visa for traveling abroad. Income tax document is proof of your income and other important details like PAN card, address etc. This will ensure speedy processing by minimizing any kind of issues.
Cons: If you do not have the return document, it is difficult to process any type of application such as loan, insurance policy and visa process.
Tax Refunds:
Pros: Refunds are paid at 8% interest per annum from 1st April of the year, based on the returns filed.
Cons: There may be occasions where you have not filed your return and excess TDS has been deducted by your company. Unless you file income tax return, you will not get refund and you may lose money.
Income Official scanner
Pros: If you file accurate returns, the authorities will not hold you for unknown reasons.
Cons: If you come under the scrutiny of the tax officer, you may have to pay tax along with interest and penalty on the tax amount due. In addition, you should be prepared to submit documents of your sources of income.
I recommend filing income tax returns to avoid any kind of tax inversion. You can easily file return manually or filing company tax returns online