By Ramalingam K
The season of filing tax returns is here, when all those who have taxable income are required to file their returns. Also, it is mandatory for those with income above Rs. 5 lakhs to e-file their return. Its very important to file error-free Income tax Return to avoid future problems. Lets see the most commonly committed mistakes and how they can be avoided.
1.Incorrect personal details: Every year a large number of returns are rejected for incorrect personal details like name, bank account number, IFSC code and address. This leads to delays in refunds. So, please be sure to fill correct personal details.
2. Mistakes in claiming deductions under section 80C: Many of us think that employers contribution to EPF has to be included in claiming sec 80C benefits. That is incorrect. Similarly, only the principal repaid on housing loan is eligible for sec 80C. Many other deductions are claimed under wrong heads leading to their rejection and consequent emergence of tax liability.
3. Failure to include certain income: There are certain incomes which are left out erroneously. These could be – Interest from Bank FD. Yes the interest on FD is taxable, – Income from investments made in the name of spouse/children. – Income from previous employer
4. Interest Income on savings account: Though interest received in savings account up to Rs 10000/- a year is not taxable, the interest received has to be mentioned in the return under the head Income from other sources, so that exemption can be claimed.
5. Non-reporting of exempt income: Exempted Income like PPF interest, dividends, LTCG from equities, maturity proceeds of insurance policies need to be mentioned in the separate annexure of ITR. This will reduce unnecessary income tax queries later.
6. Failure to account for more than one property: These days many of us own more than one property. These may be self occupied or vacant. However as per the IT Act 1961, only one property can be claimed as self occupied. The other property is taxed at realizable municipal rates after deducting 30% for taxes and repairs.
7. Discrepancy in TDS details: Many of us file returns without verifying Form 26AS credit of TDS held with the IT Department. If your employer or anyone else who has deducted TDS does not deposit the same with the IT Department or fails to mention your PAN correctly, that amount will not reflect in 26AS leading to default. Hence, do check that credit for TDS deducted has been mentioned in Form 26AS. If there is a problem, take timely action to rectify the same.
8. Failure to pay advance Tax or self-assessment tax: Many of us have income from sources where TDS is not applicable. The individual is required to calculate the tax liability and pay Advance tax or Self-assessment tax before the closure of the financial year, i.e., 31st March. Failure to do so will attract a penalty of 1% per month from 01 Apr next financial year. At times, people file returns without paying the applicable penalty.
9. Filing of incorrect ITR Form: Many are unable to choose the correct ITR Form due to lack of knowledge. To illustrate, lets say you are a salaried person who owns one house, will get some tax free allowances and interest on savings account. You may feel that you need to fill ITR 1. This is correct only if exempt income during the financial year is less than 15000. If it is more than Rs 15000, then you are required to file ITR2.
10. Failure to dispatch ITR V in time: If there is no digital signature while e-filing IT return, it is mandatory to send duly signed ITR V to CPC Bangalore by ordinary or speed post only. Sign the ITR V in blue or black ink in the box provided. The ITR V has to be sent within 120 days of filing of return. If you fail to do so within the stipulated time, your return will be treated as null and void.
Incorrect filing of tax returns will lead to many a headaches and troubles. This is not what we want. If you are not confident of filing return all by yourself, please seek professional help. Its better to file returns correctly as well as on time to ensure mental peace. Happy filing of return!
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The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in