Income tax returns to exemptions: Expert answers your taxation questions

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I have a full-time job. Last financial year onwards, I have joined a band, and we perform at hotels and restaurants. How will this money be taxed that I get from the performance?

The income that you are earning from the performance will be reported under the head "profits and gains of business or profession (PGBP)". You need to maintain books of accounts to compute profits to file income tax return disclosing salary income and PGBP. According to the recently notified income tax return forms for the financial year 2018-19, you need to file ITR 3. In case you are opting for presumptive taxation, then you need to file ITR 4. As a freelance artist, you may choose the option of presumptive taxation if you are a resident, and that will relieve you from the requirement of maintaining books of accounts and other procedural aspects. In this case, you will need to offer only 8 per cent of the gross receipts as taxable income and will not get any deduction for expenses incurred in this regard. The presumptive rate changes to 6 per cent in case receipts are received through banking channels. If you are not opting for presumptive taxation, you can claim a deduction of all the related expenses while calculating taxable income. You will also need to comply with the other requirement of maintaining books and accounts and audit as may be applicable. But, do take care that the tax authorities, while scrutinising your return, may ask for documents and nature of the expenses claimed by you to substantiate that they were indeed related to the business. You should keep all the bills for future reference.

I have been working for seven years but never filed my income tax returns. My salary is Rs 9 lakh. I am planning to file returns this year onwards. Is there anything I need to know before I file my returns? Will the tax department send me a notice for not filing my returns in the previous years?

You have a tax filing obligation where your taxable income exceeds the maximum amount not subject to tax (Rs 2.5 lakh for 2018-19). Although you have mentioned that your salary is Rs 9 lakh, but have not stated whether you have had enough deductions and exemptions available which brings down your taxable income below Rs 2.5 lakh. If not, the other possibility could be, your employer deducted the taxes from your salary, and you do not have any other income. You, therefore, did not file the return. One more possibility could be you might have taxable income and may have some balance taxes to pay after factoring in the tax withholding done by the employer.

If your case falls in a category that your taxable income after claiming the deduction/exemptions is falling below the taxable threshold of Rs 2.5 lakh, you are not liable to file the tax return. But where your taxable income is more than Rs 2.5 lakh and even though you may not have any taxes to pay as your employer deducted the due taxes, you are still required to file the tax return. To discipline the taxpayers' filing behaviour, the government introduced the provisions to levy penal fee a few years back if a taxpayer misses the filing due date. The penal fine is Rs 5,000, where the return is filed after the due date but before December 31 of the relevant assessment year, otherwise Rs 10,000.

For taxpayers having taxable income not exceeding Rs 5 lakh, it is Rs 1,000. But in case one does not file the tax return by March 31 of the relevant assessment year, such individuals would never be able to file the tax return. The return for the financial year 2017-18, for example, cannot be filed after March 31, 2019. In case, there are any taxes payable; then one is also exposed to the interest and penalty. In extreme cases of willful default of not filing the return, the tax authorities may initiate the prosecution proceedings as well. 

You should review your situation and also check the compliance portal to see if the income-tax (I-T) department issued any communication to you.
The writer is partner and leader, personal tax, PwC India. The views expressed are the expert’s own. Send your queries to

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