As the last date for filing income tax returns draws nearer, there are numerous queries of taxpayers. One such query is whether it’s a good idea to declare a recent purchase of property in the Income Tax Return (ITR).
Firstly, for those living under a rock, taxpayers who are yet to file their ITR for the financial year 2019-20 (the assessment year 2020-21), will have to do it by December 31, 2020.
Financial Year (FY), the period between 1 April and 31 March, is the year in which one earns an income whereas assessment year (AY) is the year that comes after the FY. During AY, the income earned between FY is assessed and taxed. So, FY 2019-20 and AY 2020-21 are the same.
The I-T department earlier extended the due date for filing the ITR, to give relief to taxpayers because of the coronavirus pandemic. Individual taxpayers have until the end of this year to file their return of income, earned between April 1, 2019, and March 31, 2020, instead of November 30. Normally, the due date for filing ITRs for all assessees whose accounts are not required to be audited is July 31.
This extension was given to provide relief to taxpayers in these stressful times of the COVID-19 pandemic and also provide the tax officials with the room to ensure compliance with statutory and regulatory requirements across all sectors. It is to the taxpayer’s benefit that the filing is not left to the last day of the extended period as waiting till the last minute to file a tax return can lead to errors.
Coming back to whether one should declare property purchased during the year, the buyer does not require to pay tax while buying a property. However, the source of money with which the purchase is made should be explainable. It is only when the property is sold that any profit is earned that tax is liable to be paid by the seller. So, the taxpayer need not declare the purchase of property while filing ITR.
According to tax and investment expert Balwant Jain, only those taxpayers who earn a taxable income above Rs 50 lakh per annum after all deductions are required to make disclose certain assets.