5 Income Sources to Remember When ITR Filing

Filing income tax returns can be an intimidating and exhausting process. There are a plethora of sources and deductions to report, and it is easy to get lost under reams of paperwork. In the midst of the chase to the deadline for ITR filing, sometimes you might omit the declaration of certain incomes. Not disclosing the various types of sources of income can have serious repercussions.

 

Most often, interest income from banks, savings, fixed deposits and post offices are missed out to be reported while filing income tax returns. These should be shown in the return even when Form 15G (for taxpayers below the age of 60) or 15H (for senior citizens) has been filed, provided the earning is not exempt under Section 10, and total income exceeds the maximum amount not taxed.

 

Remember that the exercise of filing income tax returns is not just about paying taxes but also about the disclosure of sources of income.

Given below are 5 types of income sources which should be considered while filing taxes:

• Income From Investments

Interest on savings accounts is one of the types of income sources that is taxable as per Income tax slab rates applicable to the investor. Interest earned from fixed deposits is also liable to be taxed on an accrual basis at the slab rate applicable. However, deduction under section 80TTA is allowed on interest from savings account and fixed deposit account capped at Rs.10,000 in a year. This deduction is available only to individuals and HUFs. If you furnish Form 15G or Form 15H, the bank won’t deduct TDS. 

• Income From Insurance Commission

In case the total commissions earned by you as an insurance agent is less than Rs.60,000 from all sources, then certain ad hoc deductions are available to you, which can be deducted from the commission income. This income is then taxed under the head Profits & Gains of Business & Profession. If the commission earned by you as an insurance agent exceeds Rs.60,000 from all sources, it will be treated in the same way as that of a freelancer or a professional.

• Income from Rent

Income from property is considered taxable. This could be any property - commercial, residential or industrial, including a residential house, office building, shop, factory, hall etc. and any land associated with the building (e.g. garden, compound, playground, car parking space etc.). Under property, you need to pay tax not only on the actual income but also on deemed rental from the property in such cases. Since it gets a little complicated, you may miss out on recording it in ITR filing. But the deemed rental is to be calculated based on an assessment of the potential income that a property is capable of earning.

• Income From Family Pension

Periodical payment of a pension or uncommuted pension is completely taxable under salary. Lump sum or commuted pension received may be exempt in case you were a government employee. For private employees, it would only be partially exempt.

• Income from fees for professional/technical services

If you also take side gigs or projects, it is easy to forget them during ITR filing as they may not seem as consistent as salary. However, each earning is to be accounted for while filing income tax returns. In most cases, freelance money is only deducted to the extent of profit - any expenses related to the work are to be deducted from the money or fee received. 

Apart from the penalty there are other disadvantages of filing a return post the deadline. Some of them are:

• You lose out on interest paid on refund from the income tax department.

For example, if you are eligible for a refund and have filed the return before the due date, interest on the refund is calculated from April 1 to the date when the refund is made. If you file a belated return, interest on refund is calculated from the day you filed the return to the day the refund was granted.

• You won’t be able to carry forward losses if you file ITR after the due date.

However, if you are showing a loss under income from house property, you can carry forward the loss even if you are filing after the deadline.

From F.Y 2021 onwards, the IT department has reduced the maximum penalty for late filing of ITR to Rs.5,000 from Rs.10,000. If you file your income tax returns before 31st December of 2021, no penalty will be applied. For returns that are filed after the 31st December of 2021, the penalty limit will be increased to Rs.5,000.

The process of filing a belated return is similar to that of filing ITR before or on the due date. The only difference is that while selecting the applicable ITR form, you need to select “Return filed under section 139(4)” in the drop-down menu. If there are errors in the return that you have filed after the due date, you can still rectify it by filing a revised return. Also remember to e-verify or send your ITR V for verification to the income tax department within 120 days of filing the return.

 

As you have learned about the repercussions of missing the deadline for ITR filing, you have stronger reasons now not to miss the extended deadline this year. If you are just a little bit careful and have all the information and documents handy, filing your ITR online is a fast, easy and smooth process.