The government has announced that the last date for filing income tax returns (ITRs) has been extended to November 30, 2020, from July 31, for the financial year 2019-20. All those who have taxable income must file their return before the mentioned date. It is very crucial to file an error-free ITR to avoid prospective complications. Here we are listing some of the common tax mistakes made by the taxpayers that could be avoided.
Incorrect personal information: Each year a huge number of IT returns are rejected because of mismatch in personal details like full name, bank account number, IFSC code of the bank, address, etc. Such mismatch will lead to a delay in income tax refunds. To avoid this error always double-check the personal details before filing.
Mistakes in claiming deductions under Section 80C: The tax saving investment schemes under Section 80C are, Investments in Provident Funds such as EPF, PPF, etc., payment made towards life insurance premiums, Equity Linked Saving Schemes, payment made towards the principal sum of a home loan, SSY, NSC, SCSS, etc. Deduction claimed under wrong heads leads to the rejection of the ITR and hence arises the tax liability. The most common mistake made by most taxpayers is claiming the interest paid for housing loan repayment under Section 80C. Only the amount paid back to the principal amount is eligible for Section 80C.
Failing to incorporate certain income: No income should be left out while calculating the tax amount and filing returns. Carelessness or voluntary exclusion of income might attract penalties. Some of the common incomes which are left out erroneously could be,
- Interest from fixed deposit
- The investment made in the name of parent/partner/child
- Income from the ex-employer etc.
Interest Income on savings account: Interest amount received on behalf of savings account up to Rs 10,000 a year is not taxable. Anything more than the mentioned amount is. The interest received should be stated in the return below the subheading ‘Income from other sources’ and claim exemption.
Non-reporting of exempt income: Not reporting the exempt income: Exempted income that is valid under the Income Tax Act, 1961 like Public Provident Fund (PPF) interest, LTCG (long term capital gain) from equities, maturity proceeds of insurance policies, etc should be mentioned in a different annexure of the income tax return. This will help to reduce the redundant tax queries later.
Failing to account property: As per the Income Tax Act 1961, only one property can be claimed as self-occupied. Any other property, occupied or vacant are subject to realizable municipal rates subsequently deducting 30% for the taxes and repairs.
Miscalculation of TDS details: Some taxpayers file the return without verifying the Form 26AS credit of tax deducted at source (TDS) held with the Income Tax department. If your employer or any deductor who has taken TDS from you and has not deposited the same with the IT department, there will be discrepancies on the Form 26AS. An inaccurate entry, primarily with regards to PAN or an amount in the Form 26AS, may lead to undesirable delays in filing the ITR.
Not paying advance tax or self-assessment tax: In the case of income from sources where TDS is not applicable, the taxpayer is required to calculate the tax liability and pay Advance tax or self-assessment tax before the closing of the financial year. Failure to do so will attract a penalty.
Filing the wrong ITR Form: If you chose the wrong form to file Income Tax Returns, it will be considered defective by the Income Tax department. Read and research about each form’s applicability before filing the ITR.
- ITR 1: This should be used by an individual/Hindu Undivided Family (HUF) earning income up to Rs 50 lakh from wages, one house property, deposits.
- ITR2: This should be used by an individual/HUF with any income from ITR 1, more than one house property, lotteries, capital gains, international assets, or as an administrator or director in a company.
- ITR3: This should be used by an individual/HUF with any income under ITR 2 and who owns a company or business, freelancer or is a self-practising CA, advocate, doctor, teacher.
- ITR4: This form should be used by an individual/HUF/Partnership firm with any returns under ITR 1 and assumptive income (below Rs 2 crore) from business or employment under Section 44AD or 44AE.
Failure to dispatch ITR V on time: If you don’t have a digital signature, it is compulsory to send duly signed ITR V to CPC Bangalore. It should be sent within 120 days of the filing of return. If you fail to do so within the specified time, your return will be negotiated or considered null and void.
Incorrect filing of tax returns will lead to many complications and penalties. Make sure you avoid mistakes while filing ITR to avoid future concerns. If you have any difficulty in filing the ITR, seek professional help for the same. It is always advised to file ITR on time, the right way to avoid headaches and complexities.