Income Tax Department: Recently, an income tax notice was circulating on WhatsApp. In this, an income tax officer was asking a taxpayer for a break-up of household expenses. There was a lot of discussion on social media about this. Let us know what income tax has to do with a taxpayer’s household expenses and why the officer asked questions about the expenses.
Income tax officer looks at the source of income
When the Income Tax Department selects an income tax return for scrutiny, the officers look at the income shown in the income tax return and the source of income of the taxpayer. Then what is the reason for asking questions about the personal expenses of a taxpayer? The answer is that every person has to make some necessary expenses for himself and his family members. These include expenses on ration, insurance, expenses on social functions, hair cutting expenses, expenses on eating in restaurants, etc.
Mismatch between taxpayer’s income and expenses
Such expenses depend on the status of the person and some other things. These include education, number of family members, marital status and the area where the person lives. Based on all these things, a person spends a certain amount on his personal needs. However, many people file their income tax returns without paying attention to these things. If a person does not withdraw enough money from the bank for his expenses, it raises suspicion.
A person’s expenses may be more than his income
This raises doubts whether the person’s income is from an undeclared source, which is used for personal expenses. If a person receives such a notice and he has used his bank account or credit card for family expenses, then he can inform the Income Tax Officer about this. This ends the matter. If this expenditure is made by a close relative, then also he can inform the Income Tax Officer about this. He will have to give details of the relative’s income.
Penalty may be imposed for not disclosing the source of income
If a person does not properly tell the income tax officer about his expenses, then it will be assumed that he has some undeclared income and then a penalty will be imposed. If the taxpayer feels that the calculation of the income tax officer is not correct, then he has the right to appeal.
(The author is a chartered accountant. He is an expert in personal finance, especially matters related to income tax.)
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