Do you file your tax return yourself or is it done by a Chartered Accountant or via one of the websites that offer tax filing services? Regardless of which method you use, there are some common mistakes while filing income tax returns and you should take care to avoid them to ensure you don’t get a notice later from the Income Tax Department.
Common Mistakes While Filing Income Tax Returns
1. Not filing the income tax return itself
There is a misconception that if your employer has deducted tax, or if your gross income is below the exemption limit and if other income (like dividends, long term capital gains from sale of shares) is exempt from tax, then there is no need to file the IT return. However, according to a recent amendment in the IT Act, if your gross total income (exempt + non-exempt) exceeds the minimum exemption level (currently Rs 2.5 lakhs), you are required to file your income tax return.
2. Not verifying / checking Form 16 and Form 26AS
When you receive the Form 16 from your employer, always check all calculations. You can cross-check details of tax deducted with your Form 26AS to ensure there is no mismatch. Likewise, if you have multiple sources of income, ensure that details of payments and TDS have been added correctly to avoid any discrepancies when filing the return.
3. Using the wrong ITR form
One of the most common mistakes – if you have profits/losses from capital gains, or if you were freelancing for part of the year etc, you have to file returns using a different form than the one you’ve been used to filling in. Another source for confusion at times is the change in form numbers introduced by the IT Department. Select the correct form to avoid rejection of your IT return.
4. Incorrect or incomplete personal information
Ensure you fill in your name, address, PAN, email id/mobile number and bank details correctly. A wrong PAN will throw up a data mismatch, a wrong email id means you won’t get any acknowledgement or other communication from the IT Dept, and incorrect bank details can cause a problem if a refund is due to you. As of July 1, 2017 if you have an Aadhaar or enrolment number, it should be mentioned in the ITR as well.
5. Details of all non-dormant bank accounts not shared
Previously, taxpayers were only required to mention the details of the bank account in which they wished to receive the refund – from last year, details of all non-dormant bank accounts have to be mentioned. In the ITR form you fill this year, you are also additionally required to confirm if cash deposited in your bank accounts during the demonetisation phase exceeded Rs. 2 lakh in that duration.
6. Not disclosing all income – whether exempt or non-exempt
All income must be disclosed – regardless of whether it is exempt or non-exempt from income tax. One of the most common mistakes is not disclosing interest income on fixed deposits or recurring deposits – even if subject to TDS, the income and corresponding TDS as per Form 26AS still have to be mentioned in the ITR.
Another common error is not disclosing interest on savings bank accounts, or claiming a deduction u/s 80TTA for interest income up to Rs 10,000 but not declaring the actual interest income itself. Though interest on PPF, dividends on stocks and mutual funds or long term capital gains on sale of shares are exempt from tax for FY 2017-18, they must still be mentioned under exempt income.
7. Incorrect or Non-disclosure of Short Term and Long Term Capital Gains or Loss
Although there is a change in tax rules for long term capital gains tax on stocks and equity funds, that is applicable from April 1, 2018. However, if there was any sale of shares / property / land etc during the financial year 2017-18, it has to be reported in the income tax return as per the correct rate, and keeping indexation cost in mind. Short-term capital gains should be shown along with any short-term capital loss, with carry-forward as applicable. Sale of property/house/land should be included along with details of any relevant exemptions claimed. The ITR utility also includes an additional sheet where you can input transaction details for sale of shares of each stock so it auto-calculates and populates the Long Term Capital Gains applicable.
8. Income and TDS from previous employer not disclosed
When you switch jobs during a financial year, it is important that you share previous salary and TDS details with your new employer to avoid any mismatch or double deduction (you may get a refund later, but that’s beside the point).
If you resigned from the first job at the start of the financial year (eg Apr-Jun), it is likely the first employer deducted less tax (taking your tax saving plans or reduced gross income into account). Ensure you report this income to the second employer – if not done, mention it while filing your return.
9. Not verifying ITR-V in time
Filing your income tax return is not complete unless it has been verified. Once you file and upload your return, you have 120 days to verify ITR-V – you can either do this online or offline, by sending a signed hard copy to CPC, Bangalore.
For some reason, after filing and verifying return, if you realise there is an error, either in reporting your income or claiming any deductions, you can file a rectification request from https://incometaxindiaefiling.gov.in/ – refer to this manual from the IT Dept for more details on how to do so.
Keep the above points in mind and remember – the last date for filing your income tax return is August 31, 2019.