8 things to keep in mind while filing tax returns this year
July, 14th 2016
Some diligence and caution goes a long way while filing your income tax returns. Keeping in mind a few important things can make your tax filing a breeze. Here is a list of things to help you sail through -
File your returns online – Online filing reduces chances of error and rework. E-filers put in mandatory checks to make sure you make no mistakes. Your return is checked electronically and apparent mistakes are pointed out to you so you can correct them before submitting your return. Did you know a refund return cannot be filed on paper? Any income tax return with a refund must be filed online. Any tax return with gross total income in excess of Rs 5lakhs must also be filed online. ITR- 3, 4, 5, 6, 7 have to be mandatorily filed online too.
Reporting all bank accounts – The income tax department has made it mandatory for taxpayers to report all their bank accounts in their tax return. You must provide name of the bank, IFSC code, and bank account number and mention whether its savings or current account. Remember to mention all your bank accounts. You can omit dormant bank accounts, which have been in-operational for the past 3 financial years.
Including interest income – Almost all of us have bank accounts, fixed deposits, and some of us also hold post office savings account. All of these earn interest income which must be included in your total income and tax must be paid on it. A lot of taxpayers do not report interest income on which TDS is deducted. TDS is usually deducted @ 10%, but your tax slab may be higher. No TDS is deducted on savings account interest, even though it is fully taxable. Therefore, whether or not these interest incomes are subject to TDS, remember to include them in your return. A maximum deduction of Rs 10,000 is allowed under section 80TTA on savings account interest. This deduction must be claimed via your tax return. Include interest income in full and then claim deduction in the tax return.
Reporting foreign assets and income – The income tax department has made reporting of foreign assets and income mandatory. You may not have taxable income, but if you own foreign assets it is compulsory for you to file a tax return and report them. Foreign assets such as foreign bank accounts or stocks of foreign companies or properties outside India or retirement accounts must be reported. The government has tightened its noose around foreign wealth and you must report if you have any.
Maximising Section 80C – A maximum of Rs 1.5lakh can be claimed via section 80C. Section 80C allows a host of investments and expenses. Make sure you fill your cup. If you could not invest in PPF, NSC timely, you can still fill 80C with EPF, life insurance premium, school fees, and principal repayment on home loan. These expenses must have been made during the FY 2015-16. So make sure you claim 80C to the maximum.
Filing return to carry forward loss – Several taxpayers invest in the stock market and many incur losses which they do not report. However, short term losses on listed equity shares can be set off against capital gains. Any unadjusted losses can be carried forward and set off in future years. To be able to do so, it helps to file your return timely.
Claiming tax relief on arrears and filing form 10E – If you have received arrears of salary, pension or family pension, you are eligible to claim tax relief under section 89(1) of the income tax act. This tax relief makes sure you don’t end up paying extra tax because you received your dues late and tax rates are higher or arrears have bumped up your income. If you are claiming relief under section 89(1) make sure you have filed Form 10E online on the tax department website. Taxpayers who claim this relief but do not submit Form 10E are likely to receive a notice for non-compliance.
Verifying your tax return – The last but perhaps the most critical step to successful return submission is its verification. Returns were earlier verified via sending a signed copy of the ITR-V to CPC, Bangalore. This process took time and was fraught with many problems. Now, tax returns can be verified online via the income tax department website or by generating an OTP via aadhaar linkage or through net banking. Do remember to use one of these means to verify your tax return and complete your e-filing process. A return which is not verified is not considered filed.