While you definitely exercise due diligence when filing income tax returns (ITR), in a rush to file returns within the due date, you may end up making mistakes. Tax rules keep changing and many laymen find them difficult to understand.
Making mistakes when filing income tax returns may land you in a soup. In fact, you may not only end up losing the income tax refund, you could also be penalized and face prosecution.
Want to know more on Tax Planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.
Income Tax Return filing: 10 Tax Filing Mistakes To Avoid
Following are 10 common tax-filing mistakes which can land you in trouble:
There are a total of 7 types of income tax return (ITR) forms that are issued by the Income Tax Department. Each of the ITR Forms serves a different purpose. A taxpayer must select a particular form depending on their mode of income or status like salaried/businessman. It is important to select the right ITR Form, because the disclosure requirements may be different in different forms.
Taxpayers can either file their tax returns physically or online. The Income Tax Department mandates certain taxpayers to e-file returns. If your taxable income exceeds Rs 5 Lakhs, then it is mandatory that you e-file ITR.
The Black Money (Undisclosed Foreign Income and Assets) Imposition of Tax Act, 2015, empowers tax officers to levy a penalty of Rs 10 Lakhs if you furnish inaccurate information or fail to furnish information in the tax returns with respect to foreign income and assets. The Act mandates all ordinary resident taxpayers to disclose accurate details of their foreign assets and income outside India. So, be careful not to miss out on such income.
There are cases where employees receive a salary from the previous employer as a final settlement or receive a salary from multiple employers. All such information is required to be disclosed in the ITR form.
You can only carry forward certain losses which can be set off against short term/long term gains in the future if you file your income tax returns on or before the due date. If ITR claiming a carry forward of the current year’s losses is filed after the due date, such losses cannot be carried forward.
Capital gains on the sale of capital assets have different tax rates. Income from sale of capital assets depends upon the holding period and types of capital assets.
Taxpayers should ensure that sale of capital assets are disclosed in the correct schedules provided. These schedules are different for different capital assets. Therefore, taxpayers should ensure that sale of a capital asset is disclosed in the correct schedule.
While filing income tax returns, it is important to reconcile and disclose your income in line with the income that reflects in Form 26AS. Also, your salary income should match the details appearing in Form 16, given by your employer. Any discrepancies may force the IT Department to send you a tax notice seeking clarification. Therefore, a reconciliation of any differences avoids unnecessary trouble.
The IT Department mandates taxpayers earning more than Rs 5 Lakhs to file their income tax returns electronically. But, this is not enough. Taxpayers are also required to verify the returns. Verifying a return ensures the taxpayer’s identity is authenticated. You can e-verify the ITR in four ways:
If you fail to do so, you will be considered a non tax-filer by the tax department.
Dividend Income, PPF Interest, and so on are exempt from tax. This doesn’t mean that you do not disclose such income in the income tax returns filed. ITR Forms specifically ask for details on exempt income. Therefore, it is your responsibility to furnish such information.
Fixed deposit interest is taxable. You may get confused between tax rules applicable to savings bank account interest and FD interest. Interest income from savings bank account is non-taxable up to a limit of Rs 10,000 a year. However, you have to pay tax on interest income earned from fixed deposits if income exceeds the minimum tax exemption limit.
Be Wise, Get Rich.
The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.
Subscribe to our Youtube Channel
Hello friend! I am your personal financial advisor. By the end of this interactive session, I will help you to plan yours and your family's finances to ensure a better future.