7 mistakes you need to avoid while filing ITR
New Delhi: In order to offer some relief amid the Covid-19 pandemic crisis, the deadline to file income tax return (ITR) for FY 2019-20 has been extended to November 30, 2020. Because of this extension, taxpayers now have more time to file their income tax return. On Sunday, Finance Ministry sources clarified that there is no proposal to modify income tax returns forms.
Note that recently, certain news reports surfaced where it is reported that the purported Statement of Financial Transactions (SFT) expansion would result in the filing of high-value financial transactions in ITR by the taxpayers themselves. Saying this understanding as “totally misleading”, the FinMin sources said that it is a false conclusion. The taxpayer would not need to mention her high-value transactions in their return themself.
Filing ITR is an important financial exercise. Here are some mistakes that you need to avoid while filing tax return:
1. Wrong ITR Form: There are different income tax forms prescribed for different types of taxpayers. ITR-1 (SAHAJ) is applicable only for resident individuals having income up to Rs 50 lakh and only for those having income from salary, one house property and other sources. ITR-3 is applicable for income from business or profession and ITR-4 (SUGAM) for the presumptive method of taxation such as for freelancers. Taxpayers should be careful while choosing the ITR form. A wrong form can render the tax return filed defective and the taxpayer may receive a notice from the tax department to file the return once again.
2. Not reporting all sources of Income: While filing ITR, it is important to take into account all sources of income whether from the previous or current employment or income from investments, FD interest rate income, savings account interest income etc. and file it under the appropriate ITR form. If any income is not reported, then a discrepancy will reflect in the TDS certificate (Form 16) and Form 26AS. The tax department can send a tax demand notice asking the taxpayer to pay additional tax dues in this case.
3. Not declaring income grom capital gains: ITR requires complete details of the sale of capital assets, purchase and expenses to calculate the capital gain. In case a taxpayer makes investments to claim capital gains exemption, the details of the investment and capital gains exemption have to be provided by the taxpayer.
4. Not clubbing minor’s income: In case the taxpayers have made any investments in their minor child’s name, they should include the income such as interest income from the same as part of the income. The clubbing of income is generally with the parent whose income is higher. Taxpayers can claim a deduction of up to Rs 1,500 per child up to two children.
5. Not verifying TDS details with Form 26AS: The form 26AS carries a summary of TDS and tax payments on the income such as salary, interest or sale of immovable property. Before filing ITR, one should verify the TDS and tax payments with form 26AS. Form 26AS can be downloaded from the income-tax e-filing website.
6. Not declaring all bank accounts: A taxpayer should declare all their bank accounts in India except their dormant accounts or closed accounts. Taxpayers can choose the bank account in which they want to get their income tax refund credited.
7. Not Filing ITR: A lot of taxpayers forget that it is mandatory to file ITR even if the gross total income is less than the basic exemption limit. If an individual has deposited more than Rs 1 crore in current bank account(s) during the financial year or has spent more than Rs 2 lakh in foreign travel on self or any other person or if the electricity bill paid during the year exceeds Rs 1 lakh, you are mandated to file ITR. It is also mandatory to file ITR for resident individuals if they are holding assets outside India or have interest in any asset outside India or are authorised signatories for bank accounts located outside India.