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10 challenges taxpayers face while filing ITR
July, 04th 2019

The process of filing income tax return (ITR) can become quite complex if you do not understand the implications of what you are filling in the form.

Therefore, when you file ITR make sure you are ready with all the correct information required because any inattention on your part can lead to a higher tax outgo. ET Wealth online lists 10 challenges that taxpayers can face at the time of filing ITR and how to overcome them.

Challenge 1: Which ITR to file?
Generally, the income tax department issues seven ITR forms and which form you should use depends on your sources of income. The number of forms can also change every year. The basic ITR form for most salaried people is ITR-1. However, there are certain conditions that a person must satisfy in order to be eligible to file ITR1, therefore, all resident salaried individuals may not be eligible to file ITR-1. This is why computation of income and knowing which ITR form you need to fill becomes tricky.

Challenge 2: Computation of taxable income
Under the heads of income, there are several incomes which are tax-free and incomes from which deductions and exemptions are allowed. In a scenario like that, computing taxable income accurately becomes challenging. For instance, you may get incomes from multiple sources like fixed deposit interest, rental income from house property, savings account interest, income from short-term/long-term capital gains, etc. So, keeping a track of income from different sources to compute taxable income can become quite complicated.

Challenge 3: Calculating deductions
You can save tax by claiming deductions from income up to Rs 1.5 lakh in a financial year under section 80C of the Income-tax Act, 1961. This can be claimed by making investments in several financial products that allow section 80C benefit or by way of specified expenses like paying your child's tuition fee, etc. Sometimes taxpayers forget to claim expenses that are eligible for deductions.

Any contributions made by an individual to the National Pension System (NPS) is allowed as a deduction under section 80CCD (1) up to Rs 1.5 lakh. However, if you make an additional contribution of Rs 50,000 to NPS (over and above the limit of Rs 1.5 lakh) it can be claimed as deduction under section 80CCD(1B). Therefore, the total deduction that you can claim for contributions to NPS is Rs 2 lakh under two different sections of the income tax Act.

Similarly, for a health insurance policy, you can claim the premium paid towards the policy as a deduction under section 80D. There are several other eligible deductions available under Section 80 which you might not be aware off and can become a challenging task for you when it comes to doing proper tax-saving calculations at the time of filing ITR.

Challenge 4: Filling correct tax deducted at source (TDS) in ITR
While filling ITR, the TDS should ideally have to be the same in Form 26AS and Form 16 or 16A. There can be several reasons where the details often get mismatched. For instance, if the employer has not deposited the amount with the tax department on time, it is likely that TDS details mentioned in Form 16 will not match with Form 26AS and so on.

You must also know that the TDS is not only deductible from your salary but also from other incomes such as interest income from fixed deposits. Therefore, if the details entered by you in the ITR form do not match with Form 26AS, the return filed can be incorrect. Rectifying the same can be challenging.

Challenge 5: Having multiple Form 16s
Often it can become difficult to file your return if you have switched jobs during the financial year and even more so if you have invested money regularly during the year in tax-saving products. In such a case, you not only have to take Form 16 from your current employer but also from the previous employer/s. Filing returns with multiple Form 16s can be a bit challenging.

Challenge 6: Not able to get HRA tax relief
Nowadays, HRA calculators are easily available online. For instance, you can calculate your HRA exemption by using ET Wealth online's calculator here.

Calculating HRA exemption is important as it helps you in understanding how much exemption you can get from your income. It is also equally important to submit the necessary documents with your employer to avail the HRA benefit. If you are living in a rented house, you need to submit rent receipts, rent agreement, and Permanent Account Number (PAN) of the landlord which is mandatory if your yearly rent exceeds Rs 1 lakh with your company's human resource (HR) department.

However, in any case, if you forget to submit any one of the following documents, you won't be able to get the HRA benefit from your employer. In a scenario like that, you might face difficulty in computing HRA exemption while filing ITR.

Challenge 7: Not submitting tax proofs to the employer on time
When you submit your tax declaration to the employer without tax-saving investment proofs/documents, you don't get any deduction or exemption in your Form 16. If you claim various exemptions and deductions from salary income and provide related proofs for the same to your employer, then these will be reflected in your Form 16 which you can claim at the time of e-filing.

However, if you have not submitted the tax saving-related investment proofs/documents to your employer on time, you will not get the deduction or exemption tax benefit from your salary income and these deductions will not show in your Form 16. Hence in a scenario like this, you have to compute your taxable income carefully, filing an ITR with incomplete information can lead to higher tax outgo.

Challenge 8: Forgetting/not knowing your password
Many taxpayers are totally dependent on professional chartered accountants who take care of their ITR filing. Most of the time, their ITR accounts are also accessed by their CAs. If your link with your CA is broken or if the CA's records get erased/lost, then how will you access your account? Knowing your user ID (which is your PAN number) and password is a must.

Apart from this, a lot of us tend to forget our e-filing account's password since the account is accessed just once a year. In such a long span, generally, taxpayers forget their account's password. In a scenario like this, recovering the account can become onerous.

To overcome this challenge, you must keep a note of your password or answers to secrete questions in secrecy. You can also recover password using your Aadhaar number or registered mobile number. Make sure your registered mobile remains active during that time.

Challenge 9: Not paying advance taxes on time
If your total tax liability is more than Rs 10,000 in a financial year, then you are liable to pay advance tax during the year. This advance tax applies to all taxpayers whether you are a salaried individual, freelancer or a businessman.

You have to pay advance tax in quarterly installments with 15 percent on or before 15 June, 45 percent (minus advance tax already paid) on or before 15 September, 75 percent (minus advance tax already paid) on or before 15 December, and 100 percent (minus advance tax already paid) on or before 15 March. You will have to pay penal interest for not paying advance taxes on time if you are liable to pay the same.

Challenge 10: Last minute ITR filing
Collating information from several sources and then filing ITR with correct information at the last minute can be taxing. Unfortunately, if you have filed the wrong ITR, you will have to again file a revised one. If you miss the due date for filing the ITR and file it later, then you will have to pay a late filing fee as applicable.

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