Pay penalty of Rs 10,000 for late Income-Tax filing after December 31

I have received money from a friend abroad amounting to over Rs 2 lakh. He has said I can repay him at ease. When filing returns, can I declare it as a loan to save tax on it?

First of all, it needs to be clarified, whether this is a loan or a gift. The tax treatment will follow accordingly. If it is merely a loan, there cannot be any tax saving. You will need to disclose it under the Assets and Liabilities (AL) Schedule if your income is above Rs 50 lakh. I have assumed that this loan is interest-free. But if you are paying any interest, you may be able to claim deduction on interest paid. The interest paid will be income in the hands of your friend. You have not mentioned whether your friend transferred this money from overseas or from his Indian bank account. If it was transferred from a foreign bank account, you also need to ensure that you are compliant with the requirements of the Foreign Exchange Management Act, 1999. 

If the amount transferred by your friend is a gift, then the entire amount will be taxable in your hands. According to Section 56 of the Income Tax Act, 1961, the entire sum received without any consideration is taxable in the hands of the recipient, if the aggregate sum exceeds Rs 50,000. Gifts from close relatives are, however, not taxable in the hands of recipients. The purpose and intent of a financial transaction should be clear. It cannot change at the convenience of parties to evade taxes.

If I plan to file my returns under presumptive taxation, do I need to pay advance tax?

If you are eligible for presumptive taxation (except the business of plying, hiring or leasing goods carriages), then you are liable to pay the entire advance tax on or before March 15. You don't need to pay it in four instalments during the year. Obligation to pay advance tax arises if your tax liability exceeds Rs 10,000 in a year. The following is the schedule - up to 15 per cent of the total tax by June 15; up to 45 per cent of the total tax by September 15; up to 75 per cent by December 15; and 100 per cent by March 15. Failure to pay advance tax results in the levy of penal interest. But if the total turnover or gross receipts of your business in a tax year is not more than Rs 2 crore, or if you are engaged in a profession whose total gross receipt is not more than Rs 50 lakh in a year, and choose to declare your income under presumptive taxation regime, then you are liable to pay the entire advance tax on or before March 15. Senior citizens are exempted from the obligation to pay advance tax.

I am salaried with a total monthly income of Rs 60,000. I have missed filing my returns. I will do it in October. What are the disadvantages that I will face for late filing?

If you are planning to file the return for financial year 2018-19 in October this year, you may do so, but you will need to pay a penalty of Rs 5,000 under Section 234F (Rs 1,000 if taxable income is below Rs 5 lakh). If you do not file the return by December 31, 2019, the penalty will be Rs 10,000. If you miss the March 31, 2020, deadline, you will not be able to file your return. If there are any taxes payable, the assessee needs to pay it before filing the return along with interest. 

Since you have already missed the deadline, you will not be able to carry forward any loss (except house property loss). If there is a tax refund, the income tax department will not pay you any interest from April 1, 2019, until the time you file the return. Timely filing of return is strongly recommended as the tax authorities have the power to initiate prosecution proceedings in extreme cases of wilful defaults.

The writer is partner and leader, personal tax, PwC India. The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in