Few tips to Prevent Income Tax Raids

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Few tips to Prevent Income Tax Raids.

One should not keep any unaccounted or undisclosed money, property or income popularly known as black money. If such a disclosure is made before its detection by the Income Tax Department, the chances of being trapped in a tax raid are minimized. A tax raid may also be conducted against a person in possession of undisclosed income or property not belonging to him but to someone else. It is therefore important for a person who is in possession or in custody of someone else’s jewellery or other valuables, etc. to ensure that they are duly accounted for.

DOES

1. Make correct disclosure of income and wealth in returns: One should make a full and true disclosure of one’s taxable & exempt income. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer.

2. Comply with summons or notices to prevent a tax raid: – It is absolutely necessary to fairly and properly comply with the summons. Wherever this is not possible, proper adjournment should be sought. Co-operation on the part of a person, whether he is an income tax assessee or not, will ensure prevention of a raid.

3. How to declare exempted or non-taxable income and wealth:- When the entire picture is placed before the Assessing Officer, there is little scope or raid on the grounds of possessing undisclosed income. In view of the relaxed wealth tax exemption limit, many will now be outside the wealth tax net, hence they may enclose their statement of wealth with the income tax return.

4. Preserve important vouchers and other documentary evidence for the acquisition of assets: – It is vital to preserve important vouchers and/or other documentary evidence as proof for their acquisition. This is necessary to prove the acquisition of such assets in case an inadvertent income tax raid takes place and the assessee is called upon to prove the nature and source of acquisition.

5. How to prevent income tax raid on lockers & safe deposit vaults? :-The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities with custodian to get a declaration from the owner regarding the nature and source of the articles to satisfy.

DON’TS

Don’t introduce fresh capital over 10 lakhs.
Don’t introduce new unsecured loans exceed 25 lakhs.
Don’t invest more than 5 times Gross Receipts ( includes agricultural income).
Don’t sale property for lesser amount than Govt. Valuation.
Don’t pay Commission above Rs. 10 lakhs.
Don’t declare total income less than 20% of professional receipts.
Don’t declare profit less than 8% of receipts if you are a contractor who’s GC Receipts exceed Rs.1 Cr.
Don’t adopt project completion method if you are builder.