Income tax returns (ITR) filing involves collecting all the required documents and furnishing them correctly in the appropriate form. The linking of Aadhaar and PAN card with all your financial transactions and investments has made it easy for the tax department to keep a track of your income and expenses. So it makes sense to arrange all the documents well in advance to avoid any kind of mistake.
Take a look at these ten common mistakes that you should avoid while filing your income tax returns.
Using Wrong Income Tax Return Form
With the income tax department introducing seven new forms this year, identifying the right form is of utmost importance. Not choosing the right ITR form can result in your returns filed being rejected. Therefore, it is important to understand which ITR form is applicable for you. You can also seek a financial expert’s help in choosing the correct ITR form.
Not Disclosing Income From All Your Sources
You have to exercise due diligence while providing details in the income tax forms as any mistake or mismatch here can bring you under I-T department’s radar. All your income from various sources, including salary, interest earned from Savings Bank Account, Fixed Deposit, etc. should be mentioned in the form. In case you miss including these in the ITR, you may get a notice from the I-T department seeking explanation. You should also mention relevant income information in case you change jobs or any other income earned during the previous financial year under the required heads.
Being Ignorant About Taxation on Multiple Properties
If you are filing your income tax return and you own multiple properties, you need to be very careful with your tax computation. It is advisable to understand all the rules to avoid any kind of mistake. Please do note that if you have more than one property, then only one will be considered self-occupied. The rest of the properties will be considered as let out and will attract tax accordingly.
Considering The Wrong Assessment Year
Often people get confused with the concept of financial year and assessment year while filing and choosing their ITR. As per IT Act of 1961, a financial year begins on April 1 and ends on March 31 and includes all income earned during this period. On the other hand, assessment year is the following year in which your income is taxed. For example, if 2017-18 is the financial year, then assessment year is 2018-19.
Claiming Exemptions Twice
If you have switched jobs in the same financial year, you would get Form 16 from both your employers and hence, you may have claimed deductions under Section 80 C twice. This implies that you have been under-taxed. So, when you are filing your return, be careful to pay the shortfall in taxes.
Delay in Filing ITR
If you file your ITR after the due date of July 31, you will have to pay a penalty up to Rs. 5000 and if you delay further and after December 31, 2018 a Rs. 10,000 fine will be levied. In case your taxable income is under Rs. 500,000 you will have to pay a maximum of Rs. 1000 as penalty. You may also lose the chance of doing any revision in case you file your returns after the specified deadline.
Not Updating Personal information
There is a possibility that you may have shifted your residence or changed your number in the financial year. It is important to update such changes while filing returns. Besides, double check your PAN, assessment year, date of birth so that you give correct information to I-T department. If you are filing return via a third party, you need to verify these details completely before finally signing it.
Assuming Interest Income Is Tax free
Most of the people believe that interest income is exempt from tax. But that is not true. You are exempted from tax on interest income on savings account up to Rs 10,000, while the full interest income on fixed deposits is taxable. Banks deduct 10 per cent on interest income over Rs 10,000 for deposits in savings account. But if you fall in the slab of high tax rate, you would have to pay the difference while filing your returns.
Tally The TDS Details In Form 26AS
To ascertain if the TDS details match, you should first download form 26AS from the e-filing portal and assess if the TDS deducted by your employer and other deductors matches with your TDS certificates and Form 16. There is a possibility that a deductor may forget to deposit the tax on time, resulting in incorrect figure. All TDS details of the past financial year should be mentioned, including the details from Form 16 of the previous employer.
Wrong tax deductions Claim
Tax deductions helps in minimising your tax outgo. While filing the return, all the deductions should be segregated and carefully mentioned. Often people commit the mistake of interchanging the deductions under various sections. For example, mentioning the figure of 80 (C) amount instead of 80 (E) or 80 (CCD) can lead to a mismatch.
You must be careful while filing the returns at each step and ensure you give complete and correct information to the I-T department to avoid tax notice and penalties in future.
The writer is CEO, BankBazaar.com.