Every year, individual taxpayers need to report their income for the previous financial year on 31st July by filing IT returns. It is advisable to file return well in time forthe last minute rush can sometimes lead to mistakes and omissions. Click here if you haven’t filed your return yet.
It is not only the income disclosure and other adjustments in the return but also personal details that have to be correct. Any failure to do so would invoke a notice from the IT department resulting in re-filing.
Following are the ten mistakes to avoid while filing returns.
Not Filing The Correct Return Form
There are different kinds of ITR forms, applicable to taxpayers depending upon their income from different sources, income for domestic and foreign investments and type of legal entity (individual, HUF, NRI, partnership, etc.).
- ITR 1 to 4: Individuals and HUF
- ITR 5: Partnership and LLP
- ITR 6: Companies
- ITR 7: Persons, including companies who are required to furnish returns u/s 139 (4A) or 139 (4B) or 139 (4D)Filing an incorrect form is as good as not filing the return. Hence, it is advisable to understand properly, which form is applicable to you.
Not Disclosing All Active Bank Accounts And Interest Income
One of the common return filing mistakes is that taxpayers are not disclosing their active saving and current bank accounts. The IT department can track all bank accounts of a taxpayer through his PAN. In case, it is revealed that the taxpayer has not disclosed all his active bank accounts at the time of filing returns, it is considered as ‘inaccurate income disclosure’ and subject to penalty.Another slip-up that taxpayers make is not include interest income details from all bank accounts. It is important to gather bank statements for the period ending 31st March to assess the total interest income. The interest income includes interest on fixed deposits as well as the savings accounts, irrespective of the amount.Sudhir Kaushik, co-founder of TaxSpanner.com says, “The interest on savings bank account is also a classic example of oversight. The interest on savings bank account is tax exempt up to Rs.10,000, but you still need to report it and then claim exemption.”
Not Mentioning Correct Personal Details
Before filing the return,you must cross-verify your personal details like name, date of birth, communication address, PAN, bank details (especially, account number ad IFSC code) and legal status entered in the form. Your personal details should match the information attached to your PAN which is available inthe IT department’s database. Failure to furnish correct bank details can result in rejection of the returns and not receiving the refund.
Not Computing Tax Deducted at Source (TDS)
The final tax liability of a taxpayer is determined at the time of filing return when tax is calculated on total income under different categories and TDS is deducted from it. If the tax paid is less than TDS, then the balance must be paid before filing the return. In case, the TDS is higher than the tax liability then a refund claim can be filed. To compute correct figure of TDS, you should obtain TDS certificate from the banks and Form 16 from the employer/s. It is strongly recommended that you refer Form 26AS availableon the IT department’s website as it gives complete details of TDS against every PAN number in its record.
Not Including Salary From Multiple Employers
If you have switched from one job to another in the previous year, then salary from all employers need to be clubbed for filing the return. The idea is to disclose all the income earnedduring the previous financial year. Also, TDS deducted from previous employer/s is available with the IT department through Form 26AS. So, non-disclosure of salary from all employers in a given financial year will fetch you a notice from the department.
Not Adjusting Losses
Just like every income should be disclosed and tax must be paid thereon, it is the right of an assessee to claim certain losses and relief on income tax provided by the IT department. These losses include short term capital losses incurred in the stock market and other unadjusted losses from capital assets. It is pertinent to mention that the losses from capital assets can only be claimed against capital gains. In case, there are no capital gains, thenthese losses can be carried forward to the next financial year.
Not Disclosing Foreign Assets / Investment And Income
For an individual who holds the status of ‘resident’, any income owing to foreign holdings needs to be disclosed in theincome tax form whether or not it is taxable. Such income includes investment in shares of companies, bank accounts and any other assets outside India. The purpose is full disclosure of all sources of income outside India, irrespective of the amount.
Not Claiming Relief For Arrears Of Salary
Relief under section 89 (1) is available to the taxpayers who have received arrears of salary or pension in the previous year. It is an endeavour to ensure that you do not end up paying extra income tax on the dues that have been cleared late. However to avail this benefit, you must have filed form no. 10E online on the IT department’s website, otherwise a notice for clarification and non-compliance can come knocking on the door.
Not Disclosing Exempt Income
If you have received any income that is exempt from income tax in the previous year, then make sure you report it properly. This will help in explaining your source of income to fund investments and expenses. Examples of exempt income include dividend income, gratuity, provident fund and any other retirement benefits that are exempt from income tax.
Not Verifying The Return
The process of filing return is not complete unless you verify your returns. Earlier,taxpayers were required to verify return by digital signatures or sending the signed physical copy of return to the Central processing Centre (CPC) at Bengaluru. But now, taxpayers can e-verify their returns through a new system called Electronic Verification Code (EVC). This option can be exercised through net banking, Aadhar number, ATM, bank account number validation, demat account number validation or income tax website.A few other classic tax return filing mistakes that taxpayers make are:
- Not being aware of the latest tax filing rules.
- Not mentioning the correct TAN of employers / deductor in the form.
- Not choosing the correct assessment year in the form.
Remember, filing a return with even one little mistake is as good as not filing a return at all and can turn out to be a big hassle for you.
It is advisable to seek services of a tax consultant to avoid the above tax filing mistakes and understand the nuances & the finer points of filing returns.
Don’t wait anymore, start return filing for this year now!
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