Compliance notices by Income Tax Department

Many people are receiving mails or messages from ITD, saying that there are some high-value transactions which are not in line with the IT filed by them. This could be because of 2 reasons:

Interest on FDs not considered while filing ITR- Normally, many people, while filing their IT, may not include the interest on FDs on which banks deduct only 10% of TDS; However, after considering income from salaries etc., they may be in 20% or 30% tax bracket; So, they have to show this interest income, pay the difference tax and revise ITR before 31st March,2021.

In some cases, there may be high-value transactions like cash deposits in bank more than Rs.10 lacs or credit card expenditure Rs.2 lacs etc., which should be in tandem with the income disclosed in ITR. If not, you have to offer proper explanation or pay tax.

Finance Knowledge to Promoters

For any start-up or SME owner, basic understanding of how finance & accounts operate is a prerequisite; This can be acquired by continuously discussing with their auditors/finance people. They also need to have some knowledge of taxation and compliance laws so that they can seek advise or question the suggestion being made by auditors. It is always suggested not to follow the CA or adviser suggestions blindly without vetting because it is the promoters who have better knowledge of their business and not their financial advisers.