What are the mistakes to avoid when filing ITR?
Mistakes to avoid while filing Income Tax returns
Income tax return for the assessment year 2018-19 can be revised by 31 March 2019.
The income tax department has notified seven ITR forms for filing of return for FY 2017-18. ITR filing process starts from choosing the correct form, which depends on the nature of income and the status of the taxpayers.
Taxpayers must fill the correct personal details such as name, phone/mobile number, date of birth, address, email ID. One should check that the details match with PAN (Permanent Account Number).
The following are the common mistake to avoid while filing ITR:
1. Choosing the wrong tax return form
The Income Tax Department has issued 7 types of income tax return (ITR) forms, and selection of an ITR form for filling tax return depends upon the type of income and status of the tax payer. ‘The disclosure requirements are different in all the forms and, therefore, it is important to choose the correct form while furnishing your income tax return, failing which your return can be treated as defective.
2. Gross total income exceeding basic exemption limit
You are required to file your income tax return if aggregate of all your income before deduction under various sections of chapter VIA like 80 C, 80 CCC, 80 CCD, 80 D, 80E, 80G, 80 GGA, 80 TTA exceeds the basic exemption limit. These sections deal with deductions available for various investments or payments made by you like PPF, NPS, ELSS, NSC, repayment of your home loan principal, school fee, life insurance premiums, mediclaim premiums, donations, interest on education loan, rent paid by self-employed etc.
3. Non-Disclosure of losses being carried forward
In order to carry forward certain losses incurred during the year for set off against income in future years, it is mandatory to file one’s income tax return on or before the due date. If the income tax return claiming carry forward of the current year’s losses is filed after the due date, such losses will not be allowed to be carried forward.
4. Non-Verification of e-filed ITR
Most of the tax payers are required to file their income tax return electronically. However, only furnishing the return electronically is not enough and you are also required to verify the return so that your identity is authenticated. “You can either e-verify the return by Aadhaar OTP, linking your login with Demat A/c, Net Banking or send the signed copy of ITR acknowledgment to CPC, Bangalore within 120 days. Failure to verify your return within the specified time can result in you being considered as a non-filer by the tax department,”
5. Assets or signing authority outside India by resident taxpayers
You are also required to file your income tax return in case you are resident in India for tax purposes and own any asset outside India in your own name as beneficial owner or have interest in any asset outside India or even when you are an authorized signatory for any account located outside India.
6. Non-Disclosure of Foreign Assets and Income
It is mandatory for all ordinary resident taxpayers to disclose correct details of their foreign assets and income outside India in their income tax returns. Under the Black Money (Undisclosed Foreign Income and Assets) Imposition of Tax Act, 2015, tax officers can levy a penalty of Rs 10 lakh if the taxpayer fails to furnish any information or furnishes inaccurate information in the return with respect to foreign income and assets. Still, lots of taxpayers do not disclose correct details of their foreign assets and income outside India.
7. Excluding FD interest from taxable income
While interest income up to Rs 10,000 from savings accounts is exempt, one is requited to pay tax on interest income earned from fixed deposits. However, taxpayers who are not aware about this rule, exclude fixed deposit interest from their taxable income, which should never be done.
The following are other few mistakes to avoid:
- Not declaring the interest income earned from bank fixed deposits (FDs), recurring deposits (RDs), infrastructure bonds or other sources is among the most common mistake taxpayers make. The exemption under Section 80TTA is only for the interest on your savings bank balance. Interest from other sources, such as 5-year tax saving bank FDs, is fully taxable. Even the interest from tax-free instruments, such as the PPF and tax-free bonds, has to be reported in your return.
- If you fail to either e-verify your ITR or post it to Centralized Processing Centre (CPC) of the income tax department in Bengaluru, return will be treated as an invalid return. While filing ITR you are asked to digitally sign or e-verify it. In case, you do not e-verify your return, you can sign the acknowledgement copy of ITR and post it to CPC, Bangalore. The acknowledgement has to be sent within 120 days of filing of the return.
- Do not commit the mistake of ignoring the rules of taxation. For example, if you have multiple properties, only one will be considered self-occupied, while the rest of the properties will be considered as let out or rented and will be tax accordingly.
- Do not commit the mistakes of missing income from any source while filing your ITR. You should include salary, interest earned from Savings Bank Account, Fixed Deposit, etc. In case you miss any detail, you may get a notice from the tax department seeking an explanation.
- “Don’t presume that if tax has already been paid, you don’t need to file the return,” If you are resident in India, irrespective of tax liability, you have to file ITR if taxable income exceeds basic exemption limit, which is Rs 3 lakh for senior citizens (age above 60 years), Rs 5 lakh for super-senior citizens (above 80 years) and Rs 2.5 lakh for all other individual taxpayers.
- Not updating personal details is another mistake that should be avoided. A change in address and mobile number during a financial year should be mentioned while filing returns.
- Mention the bank account details accurately along with the IFSC (Indian Financial System Code). This will help to make the return process smoother. Also, taxpayers are required to report all the bank accounts held by them.
- If you have changed jobs during the year, you have to report income earned from all the employers in your tax return. Further, “if any income of your minor child or spouse is required to be clubbed with your incomes then you have to report it,
- Any mismatch in details of Form 16 and Form 26AS can also land you in trouble. Do check if the tax deductions as mentioned in both the forms are same and there are no incorrect figures.
- Not being careful about mentioning correct deductions is also a mistake that should be avoided. Do check if you have mentioned each deduction under correct heads.
- Delaying the process of tax filing should be avoided any cost. From this assessment year, you will have to pay a penalty of Rs.5000 if you file your returns after the due date and by December 31. If you file it after December 31, a fine of Rs 10000 will be levied.
- Tax experts warn against claiming deductions in ITR for which you are not eligible for. “Some taxpayers claim fake deductions or inflate existing deductions to reduce their income tax liability or to claim refunds.
Checklist before submitting ITR
- Select the Correct Assessment Year. For filing Income Tax return for Income earned between 1 Apr 2017 to 31 Mar 2018 AY is 2018-19
- Select the correct ITR or Income Tax Return Form
- Match Income and TDS with Form 26AS. Our article What to Verify in Form 26AS? Explains what information to look for in Form 26AS.
- Report Interest from Saving Bank Accounts under Income from Other sources and claim the deduction of Rs 10,000 under section 80TTA.
- Report Interest from Fixed Deposit and Recurring Deposit in Income from Other sources. Now even though TDS is not deducted Interest Income shows up in Form 26AS.
- Mention Correct Details, Personal Details, Bank Details
- Fill Salary Details properly. Give proper breakup. Else you might get Compliance Notice.
- If you work in MNC and you have stocks (RSU, ESPP, and ESOP) of foreign companies then please report it as Foreign Assets.
- Claim Deductions 80C, 80D deductions etc
- If Salaried, claim your exempt allowances. LTA & Medical Reimbursement cannot be directly claimed in your return.
- Report Exempt Income: Income from PPF, Tax free bonds, Long term capital Gains on Equity etc.
- Please club income of your wife or children. If you have opened a bank account of your child then show interest from that bank account.
- Fill correct TDS details
- You should have 0 taxes due before filing ITR. Calculate Tax Liability. Pay Self-assessment Tax if due using Challan 280 and update ITR. You should owe Zero or Nil tax to Government while filing your ITR
- After submitting ITR do E verification or send ITR-V