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For the last three years Md Saiful Islam has been preparing and submitting his income tax returns all by himself.
He attaches a photocopy of his salary statement he gets from his office along with tax returns and submits it to the respective field office.
That’s all.
Islam does not submit any other document, including statements of his bank accounts, although a tax official and two income tax analysts said a taxpayer should attach documents as proof of his or her income, wealth and expenditure statements along with the return.
Otherwise, a taxpayer may face hassles. His income tax file may fall under audit by the tax authority and this may result in increased tax liabilities.
The 48-year old said he was unaware that supporting documents along with salary statements are required.
Like Islam, many taxpayers follow the same path. They just submit the income tax return with salary certificate issued from their office. And many are totally unaware about the additional documents.
But what are the documents that one should provide along with income tax returns?
Md Mohidul Islam Chowdhury, second secretary of tax policy at the National Board of Revenue, said a salaried individual taxpayer should submit the salary statement issued from his or her office, bank statement, and a slip of provident fund, if there is any.
In case the person buys a piece of land, an apartment or a car during the previous income year, for example from July 1, 2020 to June 2021 this year, the taxpayer should file the associated registration documents too.
One should also provide statements of his or her investments in government-sponsored savings certificates, in stocks and insurance schemes along with the tax return.
If a taxpayer has any loan, the person should provide loan statements too, added Chowdhury.
And a new taxpayer should provide all the documents supporting his income and assets, he said.
In addition to providing supporting documents as proof of income, investment and loans, taxpayers should also show their expenses in line with their incomes.
“There are instances that taxpayers have shown higher expenses than their claimed incomes. This discrepancy raises questions,” said Chowdhury, citing higher expenses through credit cards than income.
“So, it is important that you spend in line with your income and show both accordingly in your tax returns…And documents supporting income, investments and expenses will enable a person to reduce the risk of falling into audit,” he said.
While submission of bank and other statements is important, what is equally important is to reconcile credits in the bank statement with income.
“It is necessary that income shown in tax return is supported by credit entries in the bank statement,” said Snehasish Barua, partner at chartered accountancy firm Snehasish Mahmud & Co.
“Otherwise, any unreconciled credit is likely to be considered as income from other sources which will be made fully taxable by tax authority,” he said.
Hence, he said, submission of fully reconciled bank statements, investment documents, loan statements and BO statement would reduce the risk of facing audit.
Jasim Uddin Rasel, a tax consultant, said taxpayers who have income from house property should provide copies of agreements on rents, bank statement, city corporation tax receipts, copy of property insurance and expenses regarding repair and maintenance.
And in case of businesspersons, he said, the types of documents to be submitted are totally different.
The taxpayer should provide the income statement and balance sheet of the business owned, including full-year bank statements to which the receipts and payments are connected.
Islam said he has two bank accounts. His office pays his monthly salary through one account. Another one is his savings account where he occasionally keeps money.
“I may need to pay some service charge to get bank statement, but I will do so from the beginning from this year,” said Islam, who has been filing returns within the submission deadline, November 30, every year.
(TDS)
