Category Archives: Law of Taxation



Belated Return

Category : Law of Taxation

Belated Return can be filed at any time before the end of the relevant assessment year or before the completion of assessment whichever is earlier.
In simple words, in case you’ve not been able to file your income tax return before the prescribed due date, you can still file a belated return of income tax after the due date as well. Under Section 139(1), the normal due date of filing of income tax return is Particulars Due Date
Where the taxpayer is
1. Company
2. Any person mandatorily required to get his tax audit done
3. A working partner of a firm whose accounts are required to be audited
30th Sept of the Assessment Year
In case of any other category of taxpayer i.e. Salaried/ Self employed/ Contract
Employee who are not required to get their tax audit done
31st July of the Assessment Year

If a taxpayer fails to submit his income tax return
1. On or before the due date mentioned under Section 139(1), or
2. If the income tax return is not filed before the due date and the income tax officer has issued a notice under section 142(1) directing the taxpayer to file his income tax return within the time specified in the notice and he has not even filed his return as required in the notice he can still file his income tax return even after the due date. Such an income tax return filed after the due date is called Belated Return.
Belated Return can be filed at any time before the end of the relevant assessment year or before the completion of assessment whichever is earlier (applicable from Assessment Year 2017-18 onwards). This can be explained with the help of an example

If due to any reason, the taxpayer is not able to file his income tax return, he can still submit a
belated return before the end of the assessment year i.e. before 31st March 2019. However, in
case you have not filed your income tax return and the income tax officer has himself started
conducting the assessment, the taxpayer can file his income tax return any time before the
completion of assessment or before 31st
March (whichever is earlier).
INTEREST UNDER SECTION 234A FOR LATE FILING
If a belated return is filed after the income tax due date, the taxpayer would be liable to pay the tax along with Interest @ 1% per month (simple interest) under Section 234A.
In case no tax is payable, the taxpayer won’t be liable to pay any interest for filing belated return of income tax after due date but before the end of the relevant assessment year.
PENALTY FOR LATE FILING OF INCOME TAX RETURN
In case the Income Tax Return after the due date, it would be considered as a Belated Return and the following penalty would also be required to be paid
Particulars Amount
If the Income is less than Rs. 5 Lakhs Rs. 1,000
If the Income is more than Rs. 5 Lakhs
Belated Return filed before 31st Dec Rs. 5,000
Belated Return filed after 31st Jan Rs. 10,000


Tax Avoidance Is Legal Tax Evasion Is Criminal

Category : Law of Taxation

Individuals and business owners often have more than one way to complete a taxable transaction. Tax planning evaluates various tax options to determine how to conduct business and personal transactions in order to reduce or eliminate your tax liability.

Although they sound similar “tax avoidance” and “tax evasion” are radically different. Tax avoidance lowers your tax bill by structuring your transactions so that you reap the largest tax benefits. Tax avoidance is completely legal—and extremely wise.

Tax evasion, on the other hand, is an attempt to reduce your tax liability by deceit, subterfuge, or concealment. Tax evasion is a crime.

How do you know when shrewd planning—tax avoidance—goes too far and crosses the line to become illegal tax evasion? Often the distinction turns upon whether actions were taken with fraudulent intent.

Business owners often find themselves subject to more scrutiny than wage-earners with a similar level of income. Why? Because a business owner has more options to avoid tax, both legally and illegals. Here are some of the most common criminal activities in violations of the tax law:

  • Deliberately under-reporting or omitting income. This is self-explanatory: concealing income is fraudulent. Examples include a business owner’s failure to report a portion of the day’s receipts or a landlord failing to report rent payments.
  • Keeping two sets of books and making false entries in books and records. Engaging in accounting irregularities, such as a business’s failure to keep adequate records, or a discrepancy between amounts reported on a corporation’s return and amounts reported on its financial statements, generally demonstrates fraudulent intent.
  • Claiming false or overstated deductions on a return. These range from claiming unsubstantiated charitable deductions to overstating travel expenses. It can also include paying your children or spouse for work that they did not perform. The IRS is always vigilant when it comes to inflated deductions from pass-through entities.
  • Claiming personal expenses as business expenses. This is an easy trap to fall into because often assets, such as a car or a computer, will have both business and personal use. Proper record-keeping will go a long way in preventing a finding of tax fraud.
  • Hiding or transferring assets or income. This type of fraud can take a variety of forms, from simple concealment of funds in a bank account to improper allocations between taxpayers. For example, improperly allocating income to a related taxpayer who is in a lower tax bracket, such as where a corporation makes distributions to the controlling shareholder’s children, is likely to be considered tax fraud.
  • Engaging in a “sham transaction.” You can’t reduce or avoid income tax liability simply by labeling a transaction as something it is not. For example, if payments by a corporation to its stockholders are in fact dividends, calling them “interest” or otherwise attempting to disguise the payments as interest will not entitle the corporation to an interest deduction. As discussed below, it is the substance, not the form, of the transaction that determines its taxability.

The IRS Criminal Investigation Division is not to be trifled with, as any number of high-profile individuals, from Al Capone to Wesley Snipes, know only too well. But, in addition to the rich and famous who make the news, there are hundreds of convictions of businessmen and businesswomen who attempted to evade payment of taxes.

Example

Example. An Ohio business man was sentenced to six months in prison, six months of home detention, and two years supervised release for attempting to evade nearly $170,000 in income taxes. He received income in the form of wages, non-salary payments, and corporate payments for his personal expenses. The personal expenses included: property tax and utility payments for his personal residence, as well as payments for a new furnace, air conditioner, air cleaner and humidifier; a down payment and loan payments for his daughter’s car; payments of his wife’s automobile insurance and car repair bills, college tuition payments for his nephew, as well as other personal expense payments.

Example. The sole proprietor of a plumbing shop was sentenced to 13 months in prison, three years of supervised release for tax evasion and ordered to pay approximately $130,000 in restitution to the IRS. The business owner willfully attempted to evade paying his federal income taxes by skimming gross receipts of his plumbing business and paying personal expenses from his business accounts and claiming them as business expenses.

As part of his tax evasion scheme, he instructed several of his employees to solicit checks from clients payable in his name, rather than in the name of the business. He then cashed these checks and did not deposit the monies into his business’ bank account. Since this money was not recorded on the books of the business, nor deposited into the business’ account, he did not include these gross receipts on his income tax return. He also deducted personal expenses as business expenses and similarly lowered the figures on his Schedule C profit, thereby substantially reducing his tax for tax years 2003 through 2006.

Tax avoidance requires advance planning. Nearly all tax strategies use one (or more) of these strategies to structure transactions to obtain the lowest possible marginal tax rate:

  • minimizing taxable income;
  • maximizing tax deductions and tax credits
  • controlling the timing of income and deductions