Income Tax Return Filing: What Happens If You Don’t Disclose All Your Income in ITR Form; Penalties Under The Income Tax Act 1961 For Under-Reporting And Misreporting Of Income

If one does not file the revised ITR form, then the department may issue penalty as per the relevant Income Tax Rules.

The income tax department has been more vigilant than ever and any mistake on your part while filing income tax return (ITR) can fetch you a tax notice this year.  The situation can turn serious if the department finds you guilty of tax evasion. This is because the income tax department has clearly stated in an advisory issued on Wednesday that such offenses will be punishable under various penal and prosecution provisions of the Income Tax Act.

Having said that you may have to pay heavy penalties if you under-report or misreport your income in new forms. For example, many people tend to avail deduction on house rent allowance even when they are staying in their own house. Such wrongful acts can put you in a serious trouble as the income tax department has now asked taxpayers to give the permanent account number (PAN) of their tenants to spot if there has been any mismatch between income earned and income disclosed.

While the last date for filing income tax return is 31^st July, here are the consequences of filing wrong information on your ITR form:

Under-reporting of income

Under-reporting can sometimes happen due to ignorance or negligence. For example, many people forget to include interest income and capital gains in their ITR.  But any deliberate attempt to give wrong information in an ITR can lead to a possible imprisonment and penal penalty under Section 277 of the income tax Act.

But if the mistake is realised then you always have the time to rectify it. Deepak Jain, CEO of TaxManager.in, an e-filing portal of income tax return, says, “For FY 2017-18 (AY 2018-19), the revised return can be filed before the end of the relevant assessment year or before the completion of assessment, whichever is earlier. The last date to file the revised return will be March 31, 2019 if the original return is filed before or on the due date – 31st July 2018.”

If one does not file the revised ITR form, then the department may issue penalty as per the relevant Income Tax Rules. For under-reporting, there is a penalty of 50% of the tax payable These mistakes could be due to negligence or ignorance of the person. It is therefore very important to pay due attention to what all income you earned during the year so that you do not attract unwanted penalty.  Even an honest mistake can make you pay a heavy amount for your oversight.

Misreporting of income

Any wrong information is classified as misrepresentation when there is suppression of facts. For example, there could be a failure to record investments or any receipt in the books of account. There can be any expenditure that you have claimed as deduction which is not supported by any document or recording of any false entry. These acts are clubbed as misrepresentation as there is a breach of trust in such transactions.

Jain, says, “Any income assessed as misreporting of income in the income tax return could attract levying of penalty  as high as 200% of the tax payable on the misreported or assessed income.”

He adds, “However, there may get a chance to appeal or apply for immunity from imposition of penalty which is dropping of the penalty to the Assessing Officer (AO), the person would require to give necessary explanation on why the specific income was under-reported or misrepresented. If the Assessing Officer is satisfied with the response, the AO might consider not to penalize the assessee.”

In the end, make sure to file your ITR return correctly this year as any oversight can lead to a possible scrutiny from the income tax department.

Don’t Miss Out on the Latest Updates.
Subscribe to Our Newsletter Today!

Subscribe Now

Subscribe Now

Enroll for our free updates

Thank you