Selection of incorrect return form and not disclosing income on which tax doesn't have to be paid are key mistakes
Individuals and Hindu Undivided Families
constitute almost 98 per cent of e-filers. This category tends to be
most prone to making mistakes while filing
returns. Begin collecting relevant documents and file
returns before the July 31 due date. Here are common mistakes to watch out for:
Choosing incorrect ITR form: The ITR (income-
tax return) form varies depending on source(s) of income. Use of incorrect
ITR form can
result in the return being treated defective. Such assessees are given
intimation under Section 139(9), asking them to rectify the mistake
within 15 days. “If the error is not rectified, the return is treated
invalid, and the I-T department will deem it to be a case of
non-filing,” says Suresh Surana, founder, RSM Astute Consulting Group.
Not disclosing several types of income: Interest income from banks — savings and fixed deposits — and post office must be reported while filing
returns.
“Interest income should be shown in the return even when Form 15G or
15H has been filed, provided the earning is not exempt under Section 10
and total income exceeds the maximum amount not taxed,” says Surana. By
filling Form 15G/15H, one can prevent
tax deducted at source (TDS) if taxable income is below the basic exemption limit, or filer is a senior citizen.
Incomes such as dividend, interest on tax-free bonds, eligible gifts, etc should also be reported even though they are
tax exempt.
“Filing tax return is not just about paying tax, but also about
disclosing sources of income, so that if filer is questioned about his
income at a later date, he can justify it using his tax return,” says
Deepesh Raghaw, founder, PersonalFinancePlan, a Securities and Exchange
Board of India-registered investment advisor.
Income shown in return does not reconcile with Form 26AS: A discrepancy between income reported in
Form 26AS and
in the return filed by the filer can lead to the I-T department making
preliminary adjustments and sending a notice under Section 143(1).
The assessee gets 30 days to respond online.
Sometimes the taxpayer does not include some income or the other while preparing his return that has been captured by
Form 26AS. “Before filing the return, look up
Form 26AS to avoid such mistakes,” says Raghaw.
Sometimes, credit for TDS is not included in Form 26AS. In case TDS has
been deducted but is not reflected in Form 26AS, follow up with the
entity doing the deduction to get the records updated.
Failure to claim deductions not shown in Form 16: Sometimes,
certain exemptions do not get reflected in Form 16. This can happen
because proof of investment was submitted late. Taxpayers are entitled
to claim those exemptions while filing their return, provided they have
the supporting documents.
Taxpayers also make mistakes when they
have multiple Form 16s. “They have difficulties in figuring out how
much tax deduction to enter in their returns. They usually see a tax
payable if they forget to disclose salary from first employer to the
second employer,” says Archit Gupta, founder and chief executive
officer, ClearTax.
Filing return after due date: Avoid this as
late-filers are denied benefits. Loss under ‘capital gains’ and under
‘business or profession’ cannot be carried forward for set-off in
subsequent years (loss on house property is the exception).
Areas where taxpayers trip
-
If a person has undertaken a high-value transaction (reflected in Form
26AS, based on annual information return filed by banks and other
financial institutions), his income shown in tax return should be in
line and not too low
- Employees who did not submit rent receipt to employer, but still want to claim HRA, tend to miscalculate exempt portion of HRA in tax return
- Computing fair market value of shares
- Calculating indexed cost of purchase of an asset
- Expenses that qualify for deduction as cost when a capital asset is sold