Income Tax Return or ITR is a form where taxpayers report about the details of their gross taxable income as well as the deductions, exemptions, and total tax liability to the income tax department. All salaried individuals, business owners, HUF or Hindu Undivided Family, companies, and firms are eligible to pay income tax.
The process of filing the income tax return is commonly referred to as income tax filing. Taxpayers can also file their tax returns online through the e-portal of the income tax department.
ITR filing is an annual process. As it involves sorting through several documents, there’s a good chance that you might miss adding some very critical information or you may provide incorrect data. It’s quite troublesome to pay attention to the details, and any mistakes could lead to notice or fine from the income tax department; not to mention that your application will also get rejected.
Therefore, it’s better to plan and compile the relevant documents in advance before the due date of July 31. The following are some of the common mistakes that one must avoid at all costs while filing income tax returns.
- Failing to disclose all the sources of income
Many cases have occurred where people haven’t reported all of their income sources. The income from interest earned on the savings account, fixed deposits, and public provident funds are taxable.
Therefore, taxpayers have to show their income from all these sources as well as the ones that are tax-free. The usual tax deduction is 10% on the interest earned on FDs. In case your income comes under a higher tax slab, you need to pay accordingly.
Moreover, salaried individuals who have switched their jobs need to show their income from both their previous and current employers.
If an investment is made from a minor’s name, any income thus generated from the investment will be liable for taxes as per the tax slab of the parent with the higher income. The total taxable amount is calculated by combining the minor’s income with their parent’s income. So always remember to consider the investments that bear your child’s name while filing your taxes.
- Not selecting the appropriate ITR form
There are provisions of eight forms from the income tax department categorized as per the nature and status of income sources. They are ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, ITR-7, and ITR-V.
Failing to conform to the right ITR form can render your tax returns defective, and you will receive a notice as per Section 139(9) to resolve your mistake within fifteen days. If you can’t revise your ITR within the stipulated time, you may request an extension from your local Assessing Officer in writing.
- Contradiction in TDS statement with Form 26AS
Any inconsistency in the reported income in Form 26AS will have unpleasant repercussions. It should show that the deducted tax amount has been deposited with the Government as well. The tax deductions from Form 16 or Form 16 A can be cross-checked from Form 26AS.
The IT department keeps a strict watch over any high-value transactions as well as the gap between your reported income and expenses. Even the slightest discrepancy can result in the issuance of a notice under Section 143(1).
Sometimes, the assessee may not include the information about some income that was filled in Form 26AS. So, it is recommended to go through Form 26AS to prevent committing such mistakes during return filing.
- Not paying tax on residential property
Taxpayers tend to assume that they are not liable to pay taxes on their residential properties when they don’t earn any income from them. But that’s a misconception. Moreover, if they fail to disclose any such properties, they will be liable for stiff penalties.
If there is more than one house registered under your name, you have to pay taxes for that as well. It doesn’t matter if a tenant has occupied it or is unoccupied.
- Entering incorrect personal details
People have to be careful while entering their personal details. Mistakes like a wrong email or postal address can be a cause of concern. As the income tax department will mostly communicate with you via post or email, it’s essential that the information you provide is accurate.
Also, make sure that you’re filling the details in their specified spaces. Taxpayers who aren’t well aware of the norms of the process may find it tricky.
Making mistakes is completely natural when you’re not used to doing something. That applies to file income tax filing returns as well. While filing ITR, one might skip some details or add wrong information. The IT department issues them a notice to rectify their errors in that case. Failure to do so can result in penalties.
So, it’s important that taxpayers take a personal interest in the ITR filing process and learn it to avoid making mistakes in the future.