Filing Income Tax returns can be a tricky affair. One mistake in the declaration of income or deduction and you could end up with a notice from the income tax department. With the deadline extended to August 31st, you now have the time to go through the process patiently and with utmost care. Make sure there is no discrepancy in your financial records.
It can be an intimidating exercise if you have multiple sources of income and/or if you are a first-time filer. There are hordes of issues that can crop up, but let’s make sure you don’t create an issue for yourself in the ITR filing process.
Here are six mistakes that are often made by taxpayers during ITR filing. Keep them in mind to avoid negative consequences:
Mistake 1: Filing ITR using the wrong form
You are required to identify which form would be applicable to you on the basis of your income quantum and income sources in the financial year. If you use the wrong form for filing Income tax returns, the return will be termed defective. This would mean double the effort on your part as you will then have to file a revised return using the correct form.
The e-filing website for income tax returns mentions the specifications as under:
For Individuals having Income from Salaries, one house property, other sources (Interest etc.) and having total income upto Rs.50 lakh
For Individuals and HUFs not carrying out business or profession under any proprietorship
For individuals and HUFs having income from a proprietary business or profession
For presumptive income from Business & Profession
For persons other than,- (i) individual, (ii) HUF, (iii) company and (iv) person filing Form ITR-7
For Companies other than companies claiming an exemption under section 11
For persons including companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) or 139(4E) or 139(4F)
Let’s take an example following from above. ITR-1 is applicable for an individual who has earned income from salary/pension, has only one house property and interest income. But, if you have incurred any long-term capital gains (LTCG) by selling equity shares and equity mutual funds, then you have to file ITR-2.
Mistake 2: Not reporting income from investments
Another prevalent mistake made by many taxpayers is omitting the income earned from investments. You are required to report and account for all the income- this includes income from investments like interest income from fixed deposits, capital gains arising from the sale of mutual funds or any other asset. Apart from salaries, make sure you report these incomes under the Income from other sources head.
There are also certain deductions allowable. Section 80TTA of the Income Tax Act provides that interest up to Rs 10,000 can be deducted from the total interest earned in a year from bank and post office savings account for individuals below the age 60 years. For senior citizens, on the other hand, deduction of up to Rs 50,000 for the interest received or accrued can be claimed under section 80TTB.
Mistake 3: Not reporting income from the last job
Often it also happens that when you switch jobs during the financial year, you miss out on reporting the income from the previous job. If any income from the previous job or any other additional gig is not reported, then a discrepancy is bound to reflect in your TDS certificate (Form 16) and Form 26AS. The tax department can send you a tax demand notice asking you pay additional tax dues if any.
It is always a good practice to verify this beforehand by obtaining the Form 16/16A from your employer or client.
Mistake 4: Not reporting all bank accounts
While filing ITR for the financial year 2014-15 onwards, a taxpayer is required to report all the bank accounts held by him. Earlier, you were only required to mention a single bank account where you wanted to receive a credit of the income tax refund if any. However, now only dormant accounts are excluded from the requirement of reporting in the ITR.
Mistake 5: Failure to claim deductions not shown in Form 16
Sometimes an exemption may not reflect in Form 16 if the proof of investment is submitted later. You are still entitled to claim those exemptions while filing the return, provided you have the supporting documents.
Mistake 6: Failure to reconcile with Form 26AS before filing ITR
As mentioned before, Form 16 and Form 26AS should reconcile. Form 26AS reflects details of tax deducted (TDS) from your income and payment of advance-tax made or any refund received during the year. If you find any discrepancy in Form 26AS then you should notify the same to tax deductor to get it rectified. Do not go ahead in the ITR filing process unless this is verified.
If you are not taking the help or assistance of a tax expert or an accountant, make sure you don’t make any of the aforementioned mistakes during the process of filing income tax returns.
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