Filing tax returns has become a lot easier now as those earning more than `5 lakh a year have to file their returns online. “With online tax filing and automation of the process, the number of mistakes done by a taxpayer during filing has reduced. With historical data auto-linked to the Permanent Account Number (PAN), one can use the saved records to pre-fill certain details. Also, there are many online platforms available to complete calculations and help file returns,” said Anil Rego, chief executive officer and founder, Right Horizons.
Even then mistakes do happen. Here are some common ones and how to avoid them.
Choosing the wrong form
One of the basic mistakes is to pick the wrong income tax return (ITR) form. There are about seven ITR forms and you need to pick the one that takes into account all your income sources. “For instance, salaried individuals can use both ITR1 and ITR2, but ITR1 only takes into account income from one house property; ITR2 includes income from more than one house property,” said Archit Gupta, chief executive officer and founder, ClearTax.in.
Filling incorrect information is another classic mistake that people make. “A common mistake made by individuals is to fill incorrect PAN, address and bank account details. These should be cross-verified before filing the return, else it may result in credit of tax refund not being allowed,” said Gokul Chaudhri, leader, direct tax, BMR and Associates LLP. Do fill up personal details such as your name, PAN, date of birth, address, correctly. “It is often noticed that the taxpayer makes simple mistakes like mentioning wrong IFSC code or bank account number. This has an impact on the refund process, as the refund is given through Electronic Clearing System,” said Rego.
Report all incomes
For salaried individuals, Form 16 works like a ready reckoner to use when filing tax returns. But one must also keep in mind incomes such as interest earned and capital gains, which may not get mentioned in the Form 16 but you still need to disclose in the tax return. “The tax department wants to understand all your sources of income regardless of whether they are tax exempt or taxable. But one of the mistakes that people make is that they ignore incomes that are exempt or on which they have already paid a tax, like the interest income on fixed deposits,” said Sudhir Kaushik, co-founder and chief financial officer, TaxSpanner.com. He said that interest on savings bank account is also a classic example of oversight. “This interest is tax exempt up to `10,000, but you still need to report it and then claim exemption.”
In order to understand all your sources of income on which you have paid tax, you can also look at Form 26AS which can be downloaded from incometaxindiaefiling.gov.in.
“Form 26AS is a compilation of various sources of income on which you have paid tax either through TDS (tax deducted at source) or TCS (tax collected at source) or advance tax. So income on which you haven’t paid tax on may not get reported at all. Therefore, you may still have a gap if you go purely by Forms 26AS and 16,” said Sonu Iyer, tax partner and national leader–people advisory services, EY India.
Also, factor in gifts to your child and investments in her name. “If a person receives immovable property or specified moveable property exceeding `50,000 as gift from a non-relative, then the person is liable to pay income tax on its fair market value. Further, if, say, a recurring deposit is opened in the name of a minor, interest earned on such a deposit is to be clubbed with the income of the parent,” said Chaudhri.
Remember, now you need to disclose details of all the bank accounts held by you in the previous year except for dormant accounts that have not been operational for over three years. From this year onwards, if your income is more than `50 lakh in a year, you also will need to give details of your assets such as land, building, cash in hand, jewellery and corresponding liabilities. Read more about it here: http://bit.ly/294YNSM.
E-verify your returns
The process of tax filing is complete only when you verify it. When you submit the return, you receive the ITR-V (acknowledgement) on your registered email address, which you need to verify.
The most basic way to do this is to take a print-out, sign it and send it to the tax department’s centre in Bengaluru, through ordinary or speed post within 120 days of filing the ITR.
To verify a tax return online, you can use your digital signature, but since many do not have digital signatures, e-verification of tax returns can also be done through Internet banking or by mentioning your Aadhaar number.
With this, you don’t have to send across your ITR-V form.
As you sit down to file your income tax returns, keep in mind these common mistakes and make sure you avoid them.