Section 139 of the Income Tax Act outlines the procedures for registration of an assessee with the Income Tax Department. It requires certain individuals and entities, including businesses, trusts, and companies, to obtain a Tax Deduction and Collection Account Number (TAN) or a PAN (Permanent Account Number) before deducting or collecting tax at source. Registration under Section 139 facilitates the filing of tax returns, allows the department to track deductions, and aids in the collection of taxes. It ensures that the correct amount of tax is being deducted and helps prevent tax evasion and fraud.
Concept of Section 139 in Income Tax
Section 139 of the Income Tax Act, 1961, is primarily concerned with the assessment and taxation of income in cases where a taxpayer fails to file their income tax return (ITR) by the due date. It empowers the tax authorities to estimate the taxpayer’s income and determine the tax liability based on the available information.
Trigger for Section 139 Assessment
- Failure to file an ITR by the due date (July 31st for individuals and October 31st for companies).
- Filing an ITR after the due date but before the commencement of assessment proceedings.
- Filing an incomplete or incorrect ITR.
Procedure for Section 139 Assessment
- The tax authorities issue a notice to the taxpayer requiring them to file their ITR or rectify any errors within a specified timeframe.
- If the taxpayer fails to comply with the notice, the authorities can estimate the taxpayer’s income based on their available records, such as income tax challans, bank statements, or information from third parties.
- The tax authorities determine the tax liability based on the estimated income and issue a demand notice to the taxpayer.
Implications of a Section 139 Assessment
- Estimation of Income: The tax authorities can estimate the taxpayer’s income based on their perception of the taxpayer’s lifestyle, expenses, etc., leading to a potentially higher tax liability.
- Penalty: Taxpayers may be subject to a penalty of up to 50% of the tax amount under Section 271H for late filing or non-filing of ITR.
- Interest: Interest is charged on the tax liability at the prescribed rate from the due date of filing the ITR until the date of payment.
- Limited Right to Appeal: The taxpayer has limited rights to appeal against a Section 139 assessment.
Avoidance of Section 139 Assessment
- File your ITR on time and accurately.
- If unable to file on time, file your ITR as soon as possible and pay the late filing fee.
- Respond promptly to any notices from the tax authorities.
- Keep proper books of accounts and maintain supporting documents to substantiate your income and expenses.
| Consequences of Failure to File ITR on Time | |
|---|---|
| Penalty: | Up to 50% of the tax amount (Section 271H) |
| Interest: | Charged on the tax liability from the due date of filing ITR (Section 220) |
| Limited Right to Appeal: | Only allowed against the estimate of income, not the tax liability (Section 153) |
Eligibility Criteria for Section 139
Individuals and Hindu Undivided Families (HUFs) are eligible to claim deduction under Section 139 of the Income Tax Act provided they meet the following conditions:
- Total income should not exceed Rs. 15 lakhs
- Income from salary, pension, or family pension is up to Rs. 5 lakhs
- Interest income is up to Rs. 50,000
- Agricultural income is up to Rs. 5 lakhs
Applicability and Conditions of Section 139
Deduction under Section 139 is available for the following types of expenses:
| Expense | Limit |
|---|---|
| Medical expenses for senior citizens (above 60 years) | Rs. 50,000 |
| Medical expenses for very senior citizens (above 80 years) | Rs. 1,00,000 |
| Preventive health check-ups | Rs. 5,000 |
| Health insurance premium | Rs. 25,000 (increased to Rs. 50,000 for senior citizens) |
| Critical illness insurance premium | Rs. 25,000 |
| Additional premium paid under the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) | Rs. 1,000 |
| Additional premium paid under the Pradhan Mantri Suraksha Bima Yojana (PMSBY) | Rs. 1,000 |
Deductions and Allowances under Section 139
Section 139 of the Income Tax Act pertains to the deductions and allowances available to taxpayers while computing their taxable income. These deductions and allowances aim to reduce the tax burden on individuals and incentivize desired behaviors, investments, or expenses.
- Standard Deduction: A flat deduction of Rs. 50,000 is available to all taxpayers, regardless of their income level, to cover basic household expenses.
- House Rent Allowance (HRA): Taxpayers who pay rent can claim an allowance for their housing expenses. The amount of HRA that is exempt from tax is determined based on various factors, including the taxpayer’s salary, the rent paid, and the location of the rented property.
- Conveyance Allowance: Taxpayers who receive an allowance from their employer to cover travel expenses can claim it as a deduction. The amount of conveyance allowance that is exempt from tax is limited to Rs. 800 per month.
- Travel Allowance: Taxpayers whose job requires extensive travel can claim an allowance for their travel expenses. The specific rules and limits for travel allowance vary depending on the nature of the taxpayer’s work.
- Professional Tax: Taxpayers who pay professional tax to the state government can claim it as a deduction from their taxable income.
- Donations: Contributions made to approved charitable organizations are eligible for deductions under Section 80G. The amount of the deduction depends on the type of donation and the organization receiving it.
| Deduction/Allowance | Eligible Taxpayers | Amount |
|---|---|---|
| Standard Deduction | All taxpayers | Rs. 50,000 |
| House Rent Allowance (HRA) | Taxpayers paying rent | Varies based on salary, rent paid, and location |
| Conveyance Allowance | Taxpayers receiving allowance from employer | Up to Rs. 800 per month |
| Travel Allowance | Taxpayers with extensive travel requirements | Varies based on nature of work |
| Professional Tax | Taxpayers paying professional tax | As incurred |
| Donations | Taxpayers contributing to approved charities | Varies based on donation type and organization |
It is important to note that the deductions and allowances under Section 139 are subject to certain conditions and eligibility criteria. Taxpayers should consult with a qualified tax professional to determine their applicable deductions and allowances and to ensure compliance with the Income Tax Act.
Consequences of Non-Compliance with Section 139
Failure to comply with Section 139 can result in:
- Penalty of Rs. 10,000 per day: The delay penalty continues to accrue until the time the return is filed.
- Prosecution under Section 276CC: This may result in imprisonment for up to 7 years and/or a fine of up to Rs. 100,000.
- Scrutiny of Tax Return: Non-compliance with Section 139 can trigger a detailed scrutiny by the Income Tax Department.
- Loss of Certain Benefits: Taxpayers who have not filed their returns within the specified time may not be eligible for certain tax deductions, refunds, or other benefits.
- Interest on Late Payments: If the tax liability is not paid by the due date, interest will be charged on the unpaid amount.
| Consequence | Description |
|---|---|
| Penalty | Rs. 10,000 per day of delay |
| Prosecution | Imprisonment up to 7 years and/or fine up to Rs. 100,000 |
| Scrutiny | Detailed examination by the Income Tax Department |
| Loss of Benefits | Ineligibility for certain tax deductions, refunds, or other benefits |
| Interest | Charges on unpaid tax liability |
And that’s your quick lowdown on Section 139 of the Income Tax Act. Remember, understanding your taxes is vital, so if you have any further questions, don’t hesitate to dig deeper or reach out to a tax professional. Thanks for taking the time to read this, and be sure to drop by again for more tax-related knowledge bombs. Until next time, keep your finances in check and your taxes sorted!