Why you shouldn’t rush to file your tax returns by 5 Aug

The income tax law sets out two deadlines for filing your returns in the financial year just gone by: 31 July is the default date; 30 September is the last date for companies and all others who need to get their accounts audited. The Central Board of Direct Taxes (CBDT) has extended the last date for the first category by five days this year, enabling those who were required to but had not filed their returns by 31 July 2013 to do so by 5 August 2013 for income earned or accrued during the financial year 2012-13 (assessment year 2013-14).

There are many walks of life where the first mover has an advantage. But there are a few areas where the early bird, instead of getting the worm, gets worms. Keeping mum in debates till the penultimate speaker has spoken often enables the last speaker to have the last laugh with the benefit of hindsight.

Similarly, filing the income tax return at the earliest opportunity carries the risk of giving the assessing officer an unnecessary handle to beat you with.  The income tax department warns taxpayers to find out from form 26AS (available on the taxman’s website) what the department is crediting you for taxes paid by way of advance tax and tax deducted at source (TDS). The idea is that you do not claim credit in your return for anything more than what you have been credited for in your Form 26AS.

There is often a considerable time-lag between taxes deducted (TDS) and the uploading of information by the bank with which the TDS amount has been deposited.  Some of the deductors are also remiss in depositing the taxes in time. Not uncommonly, the two lapses – delay by the deductor in depositing and delay in uploading by the bank after the amount has been deposited – combine to make life extremely difficult for the taxpayer. These two lapses at least have the effect of getting corrected with passage of time but untold miseries are in store for those whose PAN and other material particulars have been gotten wrong by the uploading bank because, unlike the first two lapses, this is a permanent error that can fester for years unless someone interested initiates corrective action.

In the face of these errors, early birds, restless to file their returns, run a risk.  Armed with TDS certificates, they have every right to claim greater credit than what is shown in their favour in form 26AS.  They are emboldened to do so because the fault often lies with the uploading bank or the deductor who has filed wrong particulars with the bank or has been grossly derelict in not depositing the tax after having deducting it at source.

Indeed, early birds have the legal and moral right to expect tax deductors to have done they duty, but one should hold back one’s feeling of righteous anger in one’s own enlightened self-interest. Reason: if, by the time the returns are taken up for examination, form 26AS (read: departmental records) has not caught up with the figures in the income tax returns, all hell could break out. The department will blithely, almost sadistically, send notices asking taxpayers to pay up. Of course the tax officials know that in a vast majority of cases the taxpayer is not to blame.

To be sure, the taxpayer can sometimes be accused of hiding his income or only disclosing partly his real income, but he can never be accused of taking credit for TDS that he has not suffered and advance tax that he has not paid because such egregious claim would recoil on him at the end of the day.  Therefore, the blame for the discrepancy can always be laid at the door of the uploading bank or the deductor, or both, which the tax officials know but are loath to admit.  The bottom line is the taxpayer would rue the day he filed his return so early. He would do well to file his return on the last day of the assessment year, which, for the income of the financial year 2012-13, is a good eight months away – 31 March 2014.

The income tax law permits one to file returns upto 31 March – i.e. the last day of the assessment year, and targets people for a penalty of Rs 5,000 at the discretion of the assessing officer only if the returns are pushed beyond this date. In the event, the default deadlines of 31 July and 30 September are mere scarecrows, though people do take them seriously.  There is, of course, interest payable at the rate of 1 percent per month, or part of a month, for not filing returns on time, on taxes outstanding.  In CIT v. Pranoy Roy (2009) (179 Taxmann 53), the Supreme Court pointed out that no interest can be charged for non-filing of return where no tax is due. In the event, if one ensures that one has paid all the taxes either by way of TDS, advance tax or self-assessment tax, there is no way one can be hauled over coals for not filing the return on time. And there is no way one can be slapped with a penalty of Rs 5,000 for not filing the return by the so-called deadlines of 31 July and 30 September as long as one ensures that the deed is done by 31 March 2014.

By pushing the envelope, the taxpayer buys time and peace. He or she can use the time thus gained to goad the recalcitrant uploading bank(s) and deductor(s) into action.  Assuming, by playing this proactive role, one is able to bring about parity between one’s own records and form 26AS, a lot of dispute and heartburn can be avoided.

Blessed are those restless souls who want to file their returns at the earliest opportunity and find that the departmental records, insofar as tax payment is concerned, squares with their own personal records.  For them there is no harm in being early birds though there is no reward in store for them. But the truth is early birds or procrastinators, the real deadline for filing return is 31 March – i.e. the last day of the assessment year. (By S Murlidharan First Post)