We are just a few days away from the July 31 deadline for filing your
income tax returns for the financial year 2018-19. Your returns need to be filed not just in a timely manner but also in an error-free manner. A timely return filing will save you from the steep penalties applicable to belated filings. And an error-free filing will keep you from the scrutiny of the Income Tax Department. Let’s take a look at some mistakes to avoid as you file your returns. Delayed Filing & Not Filing
There are a set of circumstances in which filing your tax returns is mandatory. Where your taxable income exceeds Rs 2.5 lakh if you are under the age of 60 (or Rs 3 lakh if you are over 60, or Rs 5 lakh if you are over 80), you must file your returns. Additionally, you need to file your returns where you need a refund of excess taxes paid or wish to carry forward your capital losses to reduce your taxable income for the coming years.
The deadline for filing one’s income tax returns is the July 31 immediately succeeding the end of the financial year. So, for FY 2018-19, the deadline is July 31, 2019. If you miss this deadline, you may be penalised for a belated filing. The penalty is Rs. 5,000 for filing your returns before December 31, Rs 10,000 for filing between January 1 and March 31, or just a flat penalty of Rs 1,000 if your taxable income is under Rs 5 lakh.
Not Declaring All Your Income
There are various ways to generate income. The most widely-generated income is salary. But beyond this, there is business income, capital gains from the sale of assets such as stocks, mutual funds, etc., income from other sources as defined in the Income Tax Act, interest income from bank and fixed deposits, and so on. It is necessary to declare all your incomes under the relevant heads in your income tax returns (ITR) forms. Not declaring your income and therefore evading taxes on such income may invite the scrutiny of the Income Tax Department.
Not Using The Right ITR Form
For Assessment Year 2019-20, there are currently seven kinds of forms applicable for filing tax returns on various forms of income. They are numbered as ITR 1 to 7. ITR 1 is also known as Sahaj and is to be used by anyone with a salary income. If you have capital gains to declare, you must use ITR 2. If you have a business or professional income, you must use ITR 3. For individuals, ITR 1 to 3 may apply, whereas, for businesses, companies, trusts, associations etc., ITR 4 to 7 may apply. It is important to make sure you file via the correct form. When in doubt, read up or speak to your tax advisor.
Not Making The Correct Deductions
You are filing your tax returns for the financial year 2018-19; therefore, you must educate yourself about the tax deductions available to you for that year. You are allowed to legally reduce your taxable income using the various deductions you’re eligible for under the Income Tax Act. But you must know what these deductions are and what is the limit of the deduction to be claimed. Without this knowledge, you may miss out on deductions and end up paying excess taxes.
Furnishing Incorrect Information
Your tax returns may be scrutinised by the Income Tax Department. If the returns carry incorrect information, you may be penalised. Therefore, always furnish the correct information about your income, investments, and deductions availed. Do not be taken by anyone’s advice to incorrectly deflate your income or inflate your deductions. The penalty for tax evasion in this manner is 200 percent of the taxes evaded.
Not Keeping Track of Form 26AS
Form 26AS is the summary of tax deducted at source (TDS) for you. This is tax paid on your behalf by your employer, your clients, your bank, or someone else who needs to pay you. They may make TDS payments as applicable by law. However, sometimes, they may make mistakes while paying this TDS. Therefore, you must download a copy of your 26AS and assess it. Ensure that it contains TDS entries you can recognise. If not, initiate corrections.
Filing your tax returns can be a complicated process for new taxpayers. But arm yourself with information and avoid making rookie mistakes. Even if you make a mistake, it’s no calamity. You can file a corrected ITR later. As always, gather your ITR-related documents on time and complete the filing well before July 31, lest you get delayed by unforeseen events near the deadline.
Adhil Shetty is CEO of BankBazaar.com