Filing your Income Tax Return (ITR)? Ensure you do not make these 6 mistakes; check this example
If original income tax return has been filed in paper format or manually, then technically it cannot be revised by online mode or electronically.
The deadline for filing Income Tax Return (ITR) is nearing on July 30, 2019, for assessment year 2019-20. It is very important that, the ITR we file is free of mistakes. According to Income Tax Department, a return of income can be revised at any time during the assessment year or before the assessment made whichever is earlier. If original return has filed in paper format or manually, then technically it cannot be revised by online mode or electronically.
Archit Gupta, Founder & CEO ClearTax explains this example - When Anand sold his flat in December 2017, he remembered the tax implications of the transaction. The buyer deducted 1% tax and deposited the amount under his and his wife’s names as they owned the flat together. Anand reinvested the sale proceeds in a second flat to save capital gains. So, it came as a shock when his wife received a tax notice, which said that she had earned capital gains from the sale of a flat and did not pay taxes on them.
Where did they go wrong?
In Gupta's view, the new house was registered only in Anand’s name, and so the gains booked by Mrs Anand from the sale of the old house remained uninvested. Hence, it was taxable.
This is just one of the slip-ups that could result in a tax notice from the income tax department. The tax authorities are putting more effort to catch the evaders. The upgraded ITR form seeks detailed disclosures, without any scope for taxpayers to hide their income. If you commit a mistake, it can lead to the issuance of a tax notice from the department or paying a hefty fine.
Hence, here are some common mistakes that you should avoid to file smoothly, as per Gupta.
Declaration of all sources of income:
It is absolutely vital for you to include all your sources of income. This is the most common mistake you can make while filing your income tax return. Under the income tax law, you are required to declare and disclose income from salary earned on employment, rent from house property, capital gains on sale of assets/investments, business or profession, other sources such as interest from bank deposits. You would also need to make disclosures of income claimed exempt from tax such as exemption claimed from capital gains and dividends. In case you do not, you will receive a show cause notice from the Income tax department.
It is important here to mention that salaried taxpayers should report their income from salary in line with the form 16 issued by their employer. The new format of form 16 has been aligned to the disclosure requirements in the income tax returns for AY 2019-20. Hence, taxpayers making any additional claims as compared to their form 16 should keep their documentary proofs handy for the purpose of filing their returns.
Incorrect ITR form:
The IT department provides seven forms to file your taxes such as ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7. The applicability of the form depends on the type of income, disclosures and type of taxpayer i.e., individual, firm, company etc. For instance, the ITR-1 or SAHAJ will be filled by you if you have an income from salary or pension, a house property, or from other sources and when your total income does not exceed Rs 50L. Hence, it is important for you to know your income sources and fill the correct form.
If you own house property, you will have to declare the same. You may want to claim it self-occupied and claim interest paid on housing loan. Or a tenant or a relative may be occupying your house. Here, you need to declare the rental income received by you and declare the property tax paid by you on the same.
Misquoting LTCG on equity:
For the financial year 2018-19, taxpayers have to report long-term capital gains (LTCG) from equity investments. If the LTCG is more than Rs 1 lakh in a year, you will be taxed at 10%. You must enter details about the total consideration value, cost of acquisition, and fair market value (FMV) as on 31 January 2018 and report your long term gains or losses on the sale of equity shares or equity oriented mutual fund.
Errors in bank details:
Make sure you provide the correct bank details in the ITR forms along with the correct IFSC code details. Incorrect information can lead to non-credit or wrong credit of tax refunds claimed by you through your tax returns filed.
Mismatch in ITR forms or personal details:
Providing incorrect personal details while filing your tax returns can be a blunder and should be avoided at all costs. Due to last minute rush, you may enter the wrong name, address, PAN, and email address. This will lead to a rejection of the ITR form by the income tax department. It can also lead to loss of refunds, non-payment of taxes, or notice by the department. Here it is important to note that you have to mention and link Aadhaar number while filing the income tax return.
Finally, do not forget to verify your income tax return uploaded. The return can be e-verified using net banking or by sending a printed copy of the acknowledgement to the Central Processing Center, Bengaluru.