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:
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.
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 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.
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.
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.
There are some documents that are needed to file your income tax returns. It is important to have these handy to ensure that the process is smooth. The documents that are needed are:
If you are an individual who gets a salary, then Form 16 is a document that you wait eagerly to receive from your accounts department every year so that you can file your Income Tax Return on time. Your employer issues Form 16 as a certificate for tax deducted at source (TDS) or the tax deducted from your salary. Form 16 must have a detailed breakdown of your salary and TDS deductions on it. Salaried taxpayers can use the information provided on Form 16 for filing ITR manually or upload Form 16 on an online return filing website to automatically update the information.
If your bank has deducted tax from your income sources, such as fixed deposits, shares, mutual funds, etc., it will issue Form 16A as a TDS certificate. If you have sold the property, the buyer will issue Form 16B for you, stating the tax deducted from the total amount paid to you. Finally, if you are a landlord earning rental income of more than Rs.50,000 from a tenant, the tenant will issue Form 16C showing the tax deducted on the rent.
If these scenarios are applicable to you, you must keep Form 16A, Form 16B and Form 16C ready before filing your ITR.
Form 26AS is an important document for reference for the taxpayer before ITR filing. It is a consolidated statement of tax paid for a particular financial year and deposited to your PAN. It includes:
Tax deducted by employer
Payment of advance taxes
Tax deducted by banks
Payment of self-assessment taxes
Tax deducted by other organisations on payments made to you
You can download Form 26AS from the TRACES website. If there are any errors, you need to ask the organisation or individual who has deducted the tax to rectify the error.
To be eligible for tax deductions, you need to report and submit proof of all the investments you have made under sections 80C, 80D and 80E with your returns. You can claim income tax deductions up to Rs.1.5 lakhs for investments in tax-saving instruments such as EPF, PPF, ELSS mutual funds, ULIPs, life insurance, NPS and others. You can also claim deductions under section 80D for health insurance premiums paid for yourself, spouse and your children.
Keep the proofs of premiums paid and contribution made for the entire year handy as you’ll need to upload them to the portal.
The home loan statement helps you get all the information on the loan while filing your ITR as well as works as proof. It has details about payments made on the principal and interest of the home loan by the taxpayer. Individuals can get tax deductions up to Rs.2 lakhs on interest paid on home loans under section 24 of the IT Act.
You have to report capital gains made from equities, mutual funds and property sales while filing for ITR. Income tax return documents such as purchase deed and sale deed are required to report income from sale of property. You need statements from fund houses and brokers for capital gains received from equity and mutual funds.
Apart from these documents, don’t forget to keep your Aadhar card handy. It is now mandatory to mention Aadhar number while filing income tax returns. You also need to provide correct bank details for refunds from the income tax department.
Apart from the penalty there are other disadvantages of filing a return post the deadline. Some of them are:
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.
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.
Yes, you have the option to correct in case you make any mistakes while filing your ITR. To correct any mistake that you made, you are required to file ITR once again u/s 139(5) of the IT Act, 1961 with the correct information.
If an individual misses the ITR deadline, he/she can file for an updated income tax return. The 2022 Finance Act introduced a new concept of updated returns, which allows individuals to update their income tax returns within two years of filing.
The penalty for late filing of income tax return can go up to Rs.10,000.
It is a consolidated statement of tax paid for a particular financial year and deposited to your PAN.
The list of documents that are required are:
Form 16A/ 16B/ 16C
Home loan statement
Statement on capital gains