Avoid These 7 Mistakes While Filing Income-tax Return
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
This year CBDT has issued 7 return forms for filing of Income-tax return (ITR). Applicability of an ITR form depends on the type of income to be reported and the status of the taxpayers. Form ITR-1 ‘SAHAJ’ is the first and most simple form applicable to a resident Individual. This form can be used by the taxpayers to report three types of income – salary or pension income, income (not losses) from 1 house property and other income. If aggregate of these incomes is up to Rs. 50 lakhs and agriculture income does not exceed Rs. 5,000, the taxpayer should opt to file return in this form.
If a taxpayer isn’t taking assistance of a tax expert and he isn’t familiar with concepts of Income-tax, he may end up making some mistakes in tax return. Though these mistakes can be rectified by filing revised return but any error or omission could result in issue of notices by tax dept. and delay in tax refunds.
In this article, you can learn about the 7 common mistakes taxpayers commit while filing tax return and how to avoid them?
1. Presuming tax dept. doesn’t want you to file tax return
The weirdest mistake a taxpayer could make is presuming that he isn’t liable to file tax return. You’re liable to file return in following case even if taxes due from you has been paid by way of advance tax or TDS:
Your income exceeds basic exemption limit, which is Rs. 3 lakhs for senior citizens (age above 60 years), Rs. 5 lakhs for super senior citizens (age above 80 years) and Rs. 2.5 lakhs for all other individual taxpayers.
If you’re resident in India (other than not ordinarily resident) and you hold (as a beneficial owner or otherwise) any asset or financial interest in any entity located outside India or you have signing authority in any account located outside India. In this case you can’t file return in ITR-1.
2. Choosing a wrong ITR form
If you choose the wrong ITR form, it is likely that you will not report the complete information in ITR and tax dept. can issue a tax notice for underreporting the income.
Example, salary income of a taxpayer is Rs. 7 lakhs and during the year he has sold shares of a listed co. and earned capital gains of Rs. 1,000. If he files return in ITR-1 instead of ITR-2, then he will miss to report the capital gains in ITR-1.
3. Not claiming deductions wisely
Salaried persons are always in dilemma whether they can claim tax deductions which weren’t declared to the employer. You can claim deduction all eligible deductions even if these were not considered by the employer and aren’t reflecting in tax certificate Form 16.
More than 10 tax deductions are provided for under Sections 80C to 80U of the I-T Act. Some of these deductions are little known to the taxpayers, i.e., deduction up to Rs. 10,000 for interest earned from saving bank deposit, deduction for house rent, deduction for medical expenditures of family members, deduction if taxpayer is suffering from any disability, etc.
4. Not disclosing all income in ITR
Do you know that you have to report all interest incomes you earn from bank or profits you earn by selling shares in ITR?
It would be a big mistake if you believe that negligible or petty income aren’t to be reported in tax returns. Taxpayers get a notice when they don’t report these petty income. Tax dept. gets regular information from banks and financial institutions about your transactions which are reconciled with your tax returns. If some tax has been deducted from your income but you don’t report the corresponding income in ITR, you might get a notice to explain the reason for not reporting the said income in ITR.
Before filing of ITR, analyse your bank statement especially all credit entries to ensure that all incomes are reported in ITR. Any failure to mention these incomes can give you tax distress.
5. Delay in filing of ITR
From this year even a delay of one day in filing of ITR would cost you Rs. 5,000. A late filing fees of Rs. 5,000 shall be charged if the return is filed between August 1, 2018 and December 31, 2018. The fees shall be Rs. 10,000 if return is filed between January 1, 2019 and March 31, 2019. The late filing shall be Rs. 1,000 for small taxpayers whose taxable income is up to Rs. 5 lakhs.
So to avoid this burden, file ITR on or before July 31, 2018.
6. Check Form 26AS before filing ITR
Form 26AS is your tax passbook and it reflects details of tax deducted (TDS) from your income and payment of advance-tax during the year. If you find any discrepancy in Form 26AS then you should notify the same to tax deductor to get it rectified. Dept. reconciles the tax credit claimed by you in ITR and tax credit available in Form 26AS. The Dept. will deny credit of TDS claimed in ITR if it is missing in Form 26AS. Further, if any entry is found in Form 26AS but is not reported in ITR, a tax notice shall be issued to you to explain the reason for not reporting it in ITR.
7. Clubbing of Income from previous employer
If you have changed the job during the Year, then do remember to report the salary income earned from both the employers. It is also likely that there would be deficit in the tax liability and tax deducted by the employers. Therefore, pay the taxes before filing of return.