Consequences of Not Reporting Income from a Second Employer During ITR Filing
When it comes to filing your Income Tax Return (ITR), it is crucial to be completely transparent and disclose all sources of income. Not reporting income from a second employer can lead to severe consequences, ranging from penalties to legal actions. It is important to understand the implications and ensure compliance with the Central Board of Direct Taxes (CBDT) rules to avoid future complications.
Understanding Underreporting Income
Underreporting income means that you are not accurately reflecting your total taxable income. This practice is illegal and can attract penalties, which can be significant. The tax authorities may impose penalties ranging from 50% to 200% of the tax due on the undisclosed income. Additionally, interest may also be charged on the unpaid tax, further increasing the financial burden.
Potential Penalties and Legal Consequences
If the tax authorities discover an omission in your ITR, you may face severe penalties. In some cases, continuous non-disclosure can lead to legal actions, including fines or imprisonment. It is important to rectify the situation as soon as possible to avoid legal repercussions.
To ensure compliance, it is crucial to maintain accurate records and report all sources of income in future filings. Filing a revised return to include the omitted income before the end of the assessment year is the recommended course of action. Consulting a tax professional for guidance tailored to your specific situation can also be beneficial.
The Importance of TDS Deduction
If your second employer has already deducted Tax Deducted at Source (TDS), the data will be reflected in your 26AS. In such cases, it will be easier for the tax department to identify any discrepancies. The Income Tax department uses advanced software algorithms to detect any mismatches and ensure compliance. Therefore, hiding income from a second employer can easily be discovered.
Checking Salary Payments and TDS
Individuals' salary payments are linked to their Permanent Account Number (PAN) and enforcing TDS is required if the income falls within the minimum tax bracket. If you do not declare the income to your second employer's finance department, they will not deduct the TDS. However, the Income Tax department keeps all records of your salary, and adding income from the second job will contribute to your total income for the year.
To verify the salary payments linked to your PAN, you can visit the TRACES (Tax RELATED AccounteS) page on the Income Tax Department's official website. During year-end tax computation, the department considers the entire year's income, including salary, fixed deposits (FD), interest, capital gains, and other sources, regardless of the number of employers. You can compute your tax yourself and pay a self-assessment tax on the E-Tax payment system website.
Automatic Checks and Future Compliance
These days, the Income Tax department uses automatic checks to tally tax receipts against tax liabilities. Earlier, random scrutiny made it easier for people to evade small tax amounts. However, it has become more challenging in recent years. You may receive a demand notice under section 156 instead of an intimation under section 143(1). This means that you will likely face a demand for taxes, even for small amounts like Rs. 200, if you do not report your income.
In the future, if you earn income from another source or have a credit for taxes paid on income from elsewhere, you may not be able to credit those amounts unless you clear the outstanding demand. Ignoring this can complicate your situation and result in additional problems.
It is crucial to ensure that you comply with the CBDT rules and report all sources of income to avoid severe consequences. Ignoring the issue can lead to significant penalties and legal actions. It is advisable to act promptly and consult a tax professional to ensure you remain within the legal framework.