Rectify 'defective returns' quickly

Individuals are given 15 days time; after that, their returns are deemed invalid

Aslam Khan, an employee of a leading technology firm, received an income-tax notice, saying his return filing was defective. Khan regularly trades in stock futures and options and made losses in 2013–14. He wanted to carry forward the loss and therefore mentioned it while filing his returns. However, he was not aware that if a taxpayer files losses in business income, he or she needs to get book of accounts audited.

Thus, your returns can be termed as 'defective', if details provided are incomplete, without audit information or supporting documents. Vikram Ramchand of says this is a common phenomenon with salaried persons. Some don't know how to declare stock trading. Even those who leave their jobs and start their own professional outfit make this mistake in their first year of operations. “Typically, in the initial year, the expenses are more than the turnover, as the person makes various purchases to set the home office. But they are not aware that if they file loss, they need to get their books audited,” says Ramchand.

After taxpayers file their returns, the Income Tax department checks and validates them. If they are not successful, the officers issue a notice to the concerned person stating that their returns are deemed as defective under Section 139 (9). If an individual receives a notice, he needs to correct the mistakes and re-file returns within 15 days. If he fails to do so, the earlier returns will be deemed invalid and the person will lose all the benefits of filing his returns on time such as revision of returns, carrying forward of losses and so on. In case the person is not able to file the returns within the stipulated time, he can approach the assessing officer and seek an extension. Once the defect is removed, it will be considered as original and the filing date will be same as date of original return.

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Amol Mishra, head of tax at, says another common mistake that assessees make is not paying tax on the bank fixed deposits (FDs). Banks deduct 10 per cent mandatory tax at source and pass it to the department. This information is then added to the individual’s Form 26AS that gives details of tax deduction at source. If a person is in 20 or 30 per cent tax bracket, he should pay the remaining tax on it. Many don’t pay the balance tax on FDs thinking that whatever bank has deducted is the final liability. “Even if the assessee has paid the tax but doesn’t include the challan number while filing returns, he will get defective return notice,” says Mishra.

To re-file the defective returns, a person needs to log on the I-T e-filing website. Select the option that says ‘re-filing tax under Section 139 (9)’ and make the necessary changes. For this, taxpayers will need the CPC reference number and password that’s mentioned on the notice. They also need to keep the e-filing acknowledgement number and the date on which the original return was filed, handy.

For those who forgot to pay tax can do so and should include the challan number while re-filing. Those who have claimed losses from business need to get their books audited by a chartered accountant.

Ramchand says many such taxpayers actually opt for presumptive taxation scheme under Section 44AD if the losses are not too high. In this, a person doesn’t need to maintain a book of accounts and pay tax at the rate of eight per cent of the total turnover or gross receipts. This is because, a CA charges Rs 20,000 – 30,000 for maintaining a book of accounts and auditing them.

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First Published: Jul 30 2015 | 10:32 PM IST

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