Alert on Tax Saving Efforts:

The Govt. of India has signed a contract with IBM for Rs.205 crores to create database of 375 lakhs income tax assessees based in Mumbai, Delhi, Hyderabad, Chennai and Ahmedabad. IBM was to start this work from Sep 2007.

Further, this year Income Tax dept has not been accepting TDS certificates, donation receipts etc. along with income tax returns. This tends to believe that Indian Income tax dept is coming in position to cross verify all your claims electronically.

An assessee can be issued notice of scrutiny for a period of 6 yrs. If you can't satisfy your ITO about genuineness of your return or payment of taxes, you could be asked to pay addl. tax with interest and the IT dept is empowered to levy 300% penalty.

One needs to engage efficient CA to attend scrutiny. An efficient CA may charge Rs.2,000/= or more per hour for time he devotes for visits to Income tax office and the time he spends in his office for preparation of replies. The CA's bill may come for more than Rs.25,000/=.

This year and last year income tax dept has issued plenty of notices to small income assessees whose capital is big.

Normally, the ITO gives tension to assessees. During scrutiny, he can ask for your passbooks and can verify correctness of your claims and in the process may come across various other issues.

Saving Rs.1,00,000/= in tax is no wise decision looking to the gravity and contract to IBM for creating database.