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August, 24th 2021
While filing ITR there are too many things that one needs to get in order - investment proofs, Form 16, TDS certificates etc. However, in this rush taxpayers often forget to look into minor details, which if ignored can hamper the entire process.
Taxpayers often get confused about the assessment year relevant to a financial year and as a result often file the wrong one, says Archit Gupta, Founder and CEO, ClearTax.
To understand it clearly, the period between 1 April, 2020 and 31 March 2021 is FY 2020-21. And, the Assessment Year is 2021-2022.
So, if the taxpayer is filing ITR before 30 September, 2021, he/she is doing it for the earnings between FY 2020-21. So, choose the assessment year accordingly.
Furnishing the correct/updated personal details
Taxpayers often make the mistake of not updating the personal details like mailing address, phone number, bank account details while filing ITR, points out Gupta.
Though it might seem like a harmless mistake, the same can have serious consequences. The IT department often sends important documents, information by e-mail and SMS; hence, if such details are not updated then you might not receive them at all.
Also in case you fail to update your bank account details, your tax return will invariably get delayed.
Understanding the old/new tax regime
Many individuals are not aware of the new and old tax regime or get totally confused, says Dilshad Billimoria, certified financial planner, Director, Dilzer Consultants
For the new regime, introduced during Budget 2020, the number of tax slabs is higher than the old tax regime. For example, in the old tax slab, anyone earning above ₹10 lakh yearly is required to pay 30% tax on their income. Now in the new tax regime, this category has been split into 2 slabs. Under the new regime, a person earning between ₹10 to 12.50 lakh annually is required to pay 25% tax on income, while people earning above that falls under the 30% tax slab.
However, the old tax regime has the option of exemptions and deductions that can lower one's tax amount significantly. Taxpayers can’t avail this benefit for the new tax regime.
“A proper calculation and analysis of both the regimes should be made before choosing the most tax efficient model for oneself," Billimoria adds.
Filing Form 26A and TDS certificates correctly
While filing ITR, taxpayers should be mindful of putting in all the required information of Form 26AS, which contains details of the tax credits that determines how much tax return the taxpayer will receive.
Shweta Jain, certified financial planner, founder, Investography, and author, My Conversations with Money, points out, Tracking refunds is something that people forget to do. Check and ensure that all TDS are reflected in the portal."
Adding to it Gupta says, While filing the TDS, it is also required to mention the income on which TDS is deducted.
Mentioning all sources of income
An individual can have income from multiple sources, like job, rent, family business etc., at the same time. Plus there can be interest income from investments. “Taxpayers are required to disclose all sources of income such as gains or losses from investments, income from other sources such as interest on RD etc., while filing ITR." Gupta says.
Additionally, in case of a change in employment during the financial year, he/she should disclose salary income from the previous employer too, he further added.
Disclosing capital gains and loss
Under the current tax rules, taxpayers now have to mandatorily disclose capital gains or losses while filing ITR. Not doing so can have serious consequences.
Though this is a common knowledge and usually people don't miss out on this, Abaneeta Chakraborty, UHNI Family Consultant says, one common mistake we see is people don’t recognise the incidence of taxation while switching funds.
“For purposes of taxation, a voluntary switch is as good as a sell and buy again - even if it is between the same plan - growth and dividend options," Abaneeta adds.
Planning taxes and tax savings is a year-long process, and many minute things can be avoided if one prepares ahead. Pointing out one of the biggest mistake that salaried individuals often do, Billimoria says, - NOT planning for and declaring their investments for tax savings for the financial year
“It is important to communicate to the finance department of their respective company what the planned savings for the financial year are to reduce TDS deductions and tax from the company side," she concludes.