Many employers ask their chartered accountants to file refunds even when there is no documentary proof for the claim which can land you in trouble. It is a better option to keep your papers safe even after the income tax return is processed, as you will have evidence to defend against future notices
Suppose you could not submit the required documents to the company in January or February for tax exemption. Because of this, your employer deducted more tax from your salary. However, you have a chance to claim a refund for the amount deducted while filing Income Tax Return (ITR) . You claim the refund but do not submit the rent agreement or receipt as you are not required to submit these documents while filing the return.
Many employees ask their chartered accountants to file refunds even when there is no documentary proof for the claim. Nagachandra Reddy, Chartered Accountant and Founder, Somu & Associates, says, “Many times employees ask to claim refund under sections 80DDB, 80U and 80G. However, many fail to do so when asked for documents to file returns.
Reddy said that he refused to file returns in such cases, but some employees filed returns on their own. Section 80G of income tax offers 50-100% tax exemption on donations to charitable institutions, while physically challenged taxpayers can avail deductions ranging from 75 to 1.25 lakhs under section 80U.
Reddy said, “There is a possibility that such returns will be processed and the income tax department will also issue tax refunds. However, in such cases scrutiny or notice is bound to happen after six months or a year. In such a situation, refund claimants without documentary proof may land in trouble.
Hence, it is a better option to keep your papers safe even after the income tax return is processed, as you will have evidence to defend against future notices. Due to Annual Information Statement (AIS), it is difficult for return filers to make changes in the information entered in the return form. AIS consists of information shared by the employer, bank, mutual fund and registrar.
Chetan Chandak, Director, TaxBirbal said, “AIS also contains details that many people forget. Therefore, not providing correct information while declaring income or claiming deduction can create difficulties for you later. In such a situation, giving correct information is the best option.
ITR of salaried people more complicated now
The growing popularity of mutual funds and stocks means that a large number of employees are now required to report capital gains and equity trading profits as well. According to chartered accountants and other tax professionals, due to this, the return filing process takes more time.
Chandak says, “AIS shows all the income of the people. For example, earlier some people did not mention the interest or any kind of capital gain in the savings account. Now all transactions and income sources can be traced. Hence, after viewing the AIS, we ask for all the documents and the process of information sharing between the client and the Chartered Accountant becomes complicated.’
In the last few years, it has been observed that many employees have started trading in the futures and options segment of stocks as well. Due to this, more information is required and ITR-3 form may also have to be used which is for business and professional people.
Reddy said, ‘The process has become complicated and the employers (companies) issue Form 16 by June 15. In this case, we have only 45 days left to process the return. Thus, there is a risk of mistake in haste. We have demanded several times to extend the last date for filing returns to August 31, but it is unlikely to be accepted.
