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Filing Income Tax Returns – Don’t make these 7 mistakes

Forms for filing of Income-tax return (ITR) for Financial Year (FY) 2017-18 have been issued by CBDT. The taxpayer is required to choose the appropriate form for filing of ITR. The applicability of an ITR form depends on the nature of income and the status of the taxpayers. For instance, Form ITR-1 ‘SAHAJ’ is the first and most simple form which is applicable to a resident. This form can be used by the taxpayers to report three types of income – salary or pension income, income (not losses) from 1 house property and other income. If aggregate of these incomes is up to Rs. 50 lakhs and agriculture income does not exceed Rs. 5,000, the taxpayer should choose ITR-1 to file tax return.

Generally, taxpayers take assistance of tax experts for filing ITR but if a taxpayer isn’t taking assistance of a tax expert then he may end up making some mistakes in tax return unless he isn’t familiar with concepts of Income-tax. Even though, these mistakes can be rectified by filing revised return but one should be ready to receive notices by tax dept. and delay in tax refunds due to any error or omission.

In this article, you will understand 7 common mistakes made by taxpayers and learn how to avoid them-

1. Liable to file ITR even if no tax dues:

Generally, a taxpayer believes that he isn’t liable to file tax return since there is no tax liability pending. It should be kept in mind that ITR has to be filed irrespective of the fact that taxes due have been paid by way of advance tax or TDS in the following cases:

a) If income exceeds basic exemption limit, which is Rs. 3 lakhs for senior citizens (age above 60 years), Rs. 5 lakhs for super senior citizens (age above 80 years) and Rs. 2.5 lakhs for all other individual taxpayers.

b) If assessee is resident in India (other than not ordinarily resident) and he holds (as a beneficial owner or otherwise) any asset or financial interest in any entity located outside India or he has signing authority in any account located outside India. In this case assessee can’t file return in ITR-1.

Income Tax Return

2. Filing return in incorrect ITR form:

If the taxpayer selects the wrong ITR Form for filing his Income Tax Return there are high chances that he will disclose incomplete information in ITR or report inaccurate details. In both cases, tax dept. can issue a tax notice for underreporting or misreporting of the income.

Example, A taxpayer has salary income of Rs. 9 lakhs and during the year he has sold shares of a listed co. and earned capital gains of Rs. 2,500. Since, he has earned capital gains; he has to file ITR-2. If he files return in ITR-1 instead of ITR-2, then he will miss to report the capital gains in ITR-1.

3. Non-Reporting of all Income in ITR:

While filing ITR, you have to report all interest incomes whether you earn interest from bank/any party or you earn any profit/gain by selling shares. It would be a big mistake if you do not report all income in tax returns and you believe that negligible or petty income aren’t required to be reported. Taxpayers should keep in mind that taxpayers will get notice if they don’t report these petty incomes. Tax dept. receives regular information from banks and financial institutions about your transactions which are reconciled with your tax returns. If some tax has been deducted from your income but you don’t report the corresponding income in ITR, you might get a notice to explain the reason for not reporting the said income in ITR.

Before filing of ITR, it is recommended that taxpayers must analyse bank statement especially all credit entries to ensure that all incomes are reported in ITR. Any failure to mention these incomes can give tax distress.

4. Reconcile with Form 26AS before filing ITR:

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. Since, Dept. reconciles all the details in ITR filed by taxpayer with the details reflecting in Form 26AS. The Dept. will deny credit of TDS claimed in ITR if it is missing in Form 26AS. Further, if any entry is found in Form 26AS but is not reported in ITR, a tax notice shall be issued to you to explain the reason for not reporting such income in ITR.

5. Lack of awareness about Tax Deductions:

In most of cases, salaried persons forget to declare tax deduction to their employers or unable to submit proofs of tax deductions in time. Due to these reasons, they are always in dilemma whether they can claim tax deductions which weren’t declared to the employer or not. It is very important to understand that eligible deductions can be claimed in ITR even if these were not considered by the employer. They can claim all eligible deductions despite the fact that those deductions aren’t reflecting in tax certificate Form 16.

More than 10 tax deductions are provided for under Sections 80C to 80U of the I-T Act. Some of these deductions are little known to the taxpayers, i.e., deduction up to Rs. 10,000 for interest earned from saving bank deposit, deduction for house rent, deduction for medical expenditures of family members, deduction if taxpayer is suffering from any disability, etc.

6. Clubbing of Income from previous employer:

If you have changed the job during the Year, then do not forget to report the salary income earned from previous employers. There are high chances that there would be change in the tax liability due to clubbing of income from previous employers. Also it would be possible that TDS might be deducted by the previous employer. Therefore, reconcile all details and pay the correct amount of taxes before filing of return.

7. Late fees for Delay in filing of ITR:

From this year, Government has levied late fees for a delay of one day in filing of ITR. A late filing fees of Rs. 5,000 shall be charged if the return is filed after July 31, 20188 but between August 1, 2018 and December 31, 2018. The fees shall be Rs. 10,000 if return is filed between January 1, 2019 and March 31, 2019. However, the late filing shall be Rs. 1,000 for small taxpayers whose taxable income is up to Rs. 5 lakhs.

Disclaimer: This information is updated till 20 June 2018.

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