8 mistakes to avoid while filing income tax returns
Income Tax department has issued various ITR forms for different kind of tax payers. Even for individuals, there are 4 ITR forms meant for different filings.
We have entered the month of July and the July 31 deadline for filing your income tax returns is not very far. Filing ITR involves collation of much information, and the process of putting these together is tedious and can lead to mistakes. Here we help you check your preparedness by listing out some common mistakes people often make when filing ITR.
Not Filing ITR
If your income qualifies for filing ITR you must do it. "Not filing of return of income may lead to levy of penalty where there is any tax payable and in extreme cases, tax authorities may even invoke prosecution provisions u/s 276CC of the Act subject to satisfaction of conditions contained therein," says Kuldip Kumar, partner & leader, personal tax, PwC India.
If your gross income is taxable i.e. above maximum income up to which no tax is charged, it is mandatory for you file your ITR. The taxability of gross income is taken as income before application of various exemptions, which are allowed under the Income Tax Act. In the FY 2017-18, for individuals less than 60 years of age, there is no tax chargeable if the income is up to Rs 2.5 lakh. Also keep in mind that you now need to file your returns electronically.
However, in certain cases you can file paper based form. You can furnish ITR 1 or ITR 4 in paper form, if your age is 80 years or more during the year of income or if your income during the previous year does not exceed Rs. 5 lakh and you do not intend to claim any refund.
Failing to file on time
If you forget to file your returns, there might be another opportunity to do it later but it would come at a cost.
"If you miss the filing deadline, you can still file the return before end of year. Return for the financial year 2017-18 can be filed within March 31, 2019 if you miss the deadline," says Kumar of PwC India.
You will need to pay a penalty of Rs. 5,000 if you file the return after July 31 but before December 31, 2018. However, if you delay it further you will end up paying a penalty of Rs. 10,000.
Selecting incorrect ITR Form
Income Tax department has issued various ITR forms for different kind of tax payers. Even for individuals, there are 4 ITR forms meant for different filings. A wrong ITR form will complicate the process and delay the processing. You have to make sure that you fill the right ITR Form, so before starting the process make sure that you identify the right form. You can go through the instructions and check the conditions for picking up a right form that suits your situation. However, if you are not feeling confident then you may take help from experts.
Picking wrong year for return
People often get confused about the year of filing their returns. You have to be clear about the year for which you are filing ITR. The simple way is to consider the financial year of your income as the Previous Year. The following year in which your income is assessed and return is required to be filed is called as assessment year. In current context the Assessment Year is 2018-19 while the Previous Year is 2017-18.
Giving incomplete or incorrect KYC
For smooth processing your ITR and a timely refund, you should provide correct information about your name, address, bank account number, IFSC code, Aadhaar, PAN, and Assets details.
"It is important to register the correct email ID and mobile number to the account as the Electronic Verification Code (EVC) will be sent to these modes.
"E-verification is an important step to successfully file a return. Apart from the EVC all important details will be sent to the registered modes of communication," says Archit Gupta, founder and CEO ClearTax.
As against the earlier practice, which required only bank account details in which you wanted the refund, now you have to provide the details of all your bank accounts while filing your ITR.
Not disclosing income from all sources
If you fail to provide income from all sources, your ITR is incomplete and may lead to revision at later stage or scrutiny by the income tax officials.
"It is important to review your interest income from various sources such as FDR's, recurring deposits, bonds and saving bank interest. It is a common error that people claim deduction under section 80TTA for Rs. 10,000/- from any form of interest income, whereas the deduction is specific to interest earned from saving bank account only," says Taranpreet Singh, partner, TASS Advisors.
To make sure that you file accurate information about all your income on which TDS was deducted, you have to match all your actual financial transactions with Form 26AS and Form 16.
"Along with salary income they should disclose the interest income on their investment and any other income they have. Since non disclosure of Income shall lead to additional penalty. They should match the salary and TDA figure with 26 AS vis-a-vis Form 16 before filing," says Sameer Arora, Managing Partner, ATMS LLP.
Not mentioning income from previous employer
Many times people forget to mention the income earned from previous employer and may give the details of only current employment.
"While filing the income tax return, it is important to consider and declare income from the previous employer, if any. It is observed that in some instances, employees generally forget to report their previous employer salary on their tax returns resulting in income mismatch notices being received at a later stage," says Singh of TASS Advisory.
Not disclosing Foreign Assets
Government has been very strict on anti-money laundering measures and disclosure of all foreign assets falls under this. To avoid being on the wrong side of the law you need to make sure that you have updated all such details in your ITR.
"Don't forget to report the foreign assets, this includes all the foreign bank accounts whether operational or not. A taxpayer also must report bank accounts where the assessee merely has a signing authority," adds Singh.