Mistakes to avoid when filing Income Tax returns
Interest on Fixed Deposits and Investments
Don’t forget to include interest earned on investments and also declare those exempt from tax , like dividend income, PPF interest
Interest Earned on FDR opened in the name of Minor Child
You open a recurring deposit in your child’s name and invest Rs 5,000 every month. If the interest earned on it is not declared while filing tax returns, the authorities can send you a notice, as it would amount to tax evasion. That’s because the interest earned by a child below 18 years is clubbed with the income of the parent.
Interest Earned on Saving Bank Account , Postal Saving Scheme
There are several such instances when individuals don’t declare their income or assets because they do not realise these items are taxable. Another example: interest earned on the cash in your savings bank SB account. In a financial year, if a person receives over Rs 10,000 in interest in the SB account, he needs to pay tax on it. Many people don’t include the interest earned on company deposits, fixed deposits, and postal saving schemes, as tax is deducted at source on these investments. However, they are supposed to declare and pay the applicable on it
Income Exempt from Tax
Many don’t report income that is exempted from tax. Say, someone sells his or her mutual fund investment after one year of holding it or receives dividends on the stocks. In the income tax form, there’s a separate schedule for such income that is exempted from tax and individuals have to declare it.
Gifts Received from Non Relatives
According to the law, if a person receives a gift valued above Rs 50,000 from a non-relative, he or she needs to pay tax on it. The value of such items is clubbed with one’s income and taxed according to the slab. However, there are certain exceptions. For example, presents received in a wedding. While these need to be declared, you don’t need to pay tax.
Two Houses : one is vacant
These days, many taxpayers own two houses. If the second house is not let out, the owner still needs to pay tax on the rent he would have received through the property. For this, the person needs to find the ongoing rent in the area, say from a real estate broker, and compute his tax liability accordingly.
Check Form no 26 AS
Before filing returns, the person should go through the Form 26AS, which is accessible once he logs into the income tax department’s e-filing website. Other than the tax deducted by the employer, taxpayers need to go through the other instances of TDS. In case the TDS from a bank or any other institution is not reflecting in Form 26AS, the person needs to approach them and ask for an update. “When people change jobs in the middle of the financial year, they forget to report the income earned from the former employer. Many salaried don’t file income tax returns if they don’t have investments or other income.
The tax department is looking closely at accounts and assets held outside India. ITR-2 seeks foreign bank account’s holding status (both as an owner and beneficiary), account opening date, interest accrued during the year and schedule and fields number under which the income is reported.
If you sold any mutual funds, stocks, property or gold during the year and made a profit, report the gains in your tax return. Some of these gains will not attract any tax but others might. In case of sale of property , the new forms seek year-wise particulars regarding any unutilised amount lying in capital gain scheme account to check for long and short term gains. If the property was situated outside India, the new forms require the taxpayer to fill the details of such capital gain income in the Schedule FSI where details of income from outside India and tax relief need to be reported.
Claim the deductions
Most taxpayers are familiar with deductions under Section 80C and Section 80D. But there are several other deductions. Choose an e-filing portal that guides you well on all these deductions.
Filing of Income Tax return
Filing of return is compulsory if your income is taxable.
If income is not taxable, there may be the TDS deducted by the Bank etc which needs to be claimed as refund which can be done only by filing the income tax return. It has been seen in the past that the income tax department is sending notices to the Assessee for not filing the income tax returns as there is TDS credit appearing in the 26 AS which has not been claimed by the Assessee.
Select the right mode of Filing Income tax Return
Online tax filing is not only easy but also mandatory for certain taxpayers.If your income is more than `5 lakh a year and includes foreign income, then you have to e-file your tax return. Even if the income is below `5 lakh but you are claiming a refund, e-filing is compulsory . E-filing not only ensures your ITR is error-free, it is more reliable.E-filed tax returns get processed faster and refunds reach you faster.
Verify your tax return
Once the filing is done, make sure ITR-V is duly signed and sent to the central processing centre Bengaluru, or EVC (Electronic Verification Code) is used (in that case ITR V need not to be sent to Bengaluru), and that the authorities have received it. If this is not done, the I-T filing is considered as invalid.
The ITR V must reach the CPC within 120 days of filing.