The deadline to file income tax return (ITR) for FY 2019-20 has been extended to November 30, 2020 in view of the difficulties arising in the pretext of COVID-19. This means taxpayers have more time to file ITR.
While filing ITR has several benefits, making mistakes while filing it can result in severe complications.
Here are common mistakes which should be avoided while filing ITR:
Choosing The Wrong ITR Form
There are different forms prescribed for different types of taxpayers. For example, ITR-1 is applicable only for resident individuals having income up to Rs 50 lakh and only for those having income from salary, one house property and other sources. Similarly, there is ITR-3 which is applicable for income from business or profession and ITR-4 for the presumptive method of taxation such as for freelancers.
"One should be careful while choosing the ITR form. A wrong form can render the tax return filed defective and the taxpayer may receive a notice to file the return once again," says Archit Gupta, founder and chief executive officer, ClearTax.
Filing ITR Without Using All Sources of Income
While computing the ITR, it is imperative to take into account all sources of income whether from the previous or current employment or income from investments and file it under the appropriate ITR form, according to Sonam Chandwani, managing partner at KS Legal & Associates.
"If any income (from previous job) is not reported, then a discrepancy is bound to reflect in the TDS certificate (Form 16) and Form 26AS. The tax department can send a tax demand notice asking taxpayer to pay additional tax dues, if any," explains Sandeep Sehgal, director - tax and regulatory, AKM Global.
Form 16 has a row where income from other employers can be reported.
A taxpayer should also report income which is received after deduction of tax or TDS. Taxpayers should also report exempt income such as PPF interest, agricultural income and LIC maturity proceeds in ITR.
No Declaration Of Income From Capital Gains On Sale Of Assets
The ITR requires complete details of the sale of capital assets, purchase and expenses to calculate the capital gain. Also, in case the taxpayer makes investments to claim capital gains exemption, the details of the investment and capital gains exemption should be given, according to Gupta.
No reporting of income from investments such as interest income
A taxpayer should report interest income from fixed deposits, savings account, post office saving schemes, bonds and other investments.
"The interest from savings accounts is also eligible for tax deduction up to Rs 10,000 for taxpayers who less than 60 years of age. In the case of senior citizens (60 years and above), the interest from fixed deposits, savings accounts and post office deposits is eligible for tax deduction up to Rs 50,000," explains Gupta.
No Clubbing of Minor's Income
In case the taxpayers have made any investments in the minor child’s name, they should include the income such as interest income as part of the income. The clubbing of income is generally with the parent whose income is higher. Taxpayers can can claim a deduction of up to Rs 1,500 per child up to two children.
Non-Verification Of TDS Details With Form 26AS
The form 26AS carries a summary of TDS and tax payments on the income such as salary, interest or sale of immovable property. Before filing, one should verify the TDS and tax payments with form 26AS.
"Taxpayers can download the form 26AS from the income-tax log-in on the e-filing website. Online tax filing platforms also pre-fill the data from 26AS into the tax return thereby enabling taxpayers to verify income while filing the tax return," says Gupta.
Non-Declaration Of All Bank Accounts
A taxpayer should declare all their bank accounts in India except dormant accounts. The taxpayer can choose the bank account in which they want to get their refund credited.
Mistakes in Claiming of Excess Amounts of Deduction in the Form of LIC Premiums, Mediclaims, Donations
It is a common notion of the taxpayer that all donations are 100 percent tax free. "However, this is not the case. Some are just 50 percent tax free," says Sehgal.
Not Filing ITR
According to Sehgal, taxpayers generally forget that it is mandatory to file ITR even if the gross total income is less than the basic exemption limit, if an individual has deposited more than Rs 1 crore in current bank account(s) during the financial year or spend more than Rs 2 lakh in foreign travel on self or any other person or if the electricity bill paid during the year exceeds Rs 1 lakh.
Also, it is mandatory to file ITR for resident individual if they are holding assets outside India or have interest in any asset outside India or are authorised signatories for bank accounts located outside India.
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