the income tax returns filing process is a cumbersome task and requires alertness to make it an error-free experience. If you commit a mistake while filing the returns, you may end up getting a notice from the Income Tax Department. Although the income tax returns (ITR) filing season is over, it has provided some useful lessons for the taxpayers to follow in future. If you take note of these lessons seriously, then you may avoid falling into the I-T Department's radar. Although the income tax returns (ITR) filing season is over, it has provided some useful lessons for the taxpayers to follow in future. If you take note of these lessons seriously, then you may avoid falling into the I-T Department's radar. Let us take a look at some important lessons learned from this year’s ITR filing process:
Plan your tax saving investment in advance
Last minute tax-saving investments can force you to invest in low return avenues. But, if you plan it in advance, then you can save tax efficiently and also earn an attractive return on it. Tax planning should start from the first day of a financial year. Early tax planning gives you ample time to invest and you don’t need to stress your liquidity all of a sudden. By investing regularly from the starting of a financial year, you get more time to average out the investment and lower the risk.
Keep your documents handy
It is important to maintain a record of your transactions and keep the documents handy. This will help smoothen your filing process and save you from last minute chaos. This year's ITR filing period came post demonetisation and GST implementation. The government had sought a declaration from taxpayers if a cash deposit of over Rs. 2 lakhs was made in their bank account during the demonetisation period. It was a smooth sail for people who had all the documents in place while filing the ITR, however, those who couldn’t furnish the required documents had some tough moments. Therefore, you should not wait until the last day to file the ITR. Therefore, you should not wait until the last day to file the ITR.
Note the details of cash transactions
Post demonetisation, the government is promoting digital transactions, while discouraging cash transactions. It is difficult for you to remember the details of all your cash transactions, however, the I-T Department is keeping a close watch on all your big cash transactions. It is thus advisable to keep a proper record of all your cash transactions.
Declaring all bank accounts
This year it was mandatory to declare all your bank accounts, except the dormant accounts. Many people often open several bank accounts without any reason while transacting only through a few accounts. It is not only difficult but confusing to remember too many bank accounts. Since filing the returns requires your bank’s annual statement, try to restrict the number of bank accounts to avoid last minute confusion.
Stay updated with new ITR rules
It is not necessary that the ITR rules of this year would remain the same for the next year too. Keep your eyes and ears open for any kind of change in the ITR filing rules as the I-T Department always notifies about updated rules. For instance, it was not mandatory to furnish details about your bank accounts last year, but this year it was made compulsory. There were no demonetisation-related details required last year, but this year it is one of the most important aspects of income tax filing. Keep these key learnings from your recent ITR filing process in mind. In the future, it can save you from penalties that the I-T department could levy in case you miss something. Do not conceal information, stay updated, file your ITR on time, and do not forget to verify it. (The writer is CEO, BankBazaar.com)