Income Tax Return (ITR) filing: Common mistakes committed by taxpayers; hefty penalty, don't do this after investing in mutual funds
Income Tax Return (ITR) filing: Omission of capital gains on units of mutual funds switched is a punishable offense under Section 169 of the Income Tax Act.
Income Tax Return (ITR) filing: A good number of salaried taxpayers file their ITR on their own, which reflects the rising sincerity of the Income taxpayers as well as their confidence and knowledge about their finances. However, it has been found that on the majority of occasions, such people commit some common mistakes, which is mainly due to their ignorance of income tax norms. These mistakes include omission committed by income taxpayers about some of the items of income, which are taxable but are generally omitted to be included in our ITR. The omission of capital gains on units of mutual funds switched is one such mistake that an income taxpayer should report while filing his or her ITR.
Speaking on the omission of capital gains on units of mutual funds switched, Balwant Jain, a Mumbai-based tax and investment expert said, "With an increasing number of people investing in mutual funds, this mistake is committed by many mutual fund investors. We as investors shift and switch our investments from one scheme of the same mutual fund house to other schemes of the same fund house for various reasons. The reasons may be non-performance of a particular scheme or it may be due to shifting to direct plan from regular plans or maybe transferred under the Systematic Transfer Plan (STP)." Jain went on to add that these transactions are not reflected in the bank statements, on the basis of which your tax advisor files the ITR in case you are not filing your ITR yourself. As the transactions of switching are not routed through the bank accounts the profit made on such transfer go unreported if not disclosed in the return of income.
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"With the long term capital gains on equity-oriented schemes also becoming taxable every transaction of the switch or shift from one scheme to other results into a profit or loss and thus needs to be properly reported in the ITR," said Jain.
Speaking on the penalty involved for such an omission Kartik Jhaveri, Manager — Wealth Management at Transcent Consultants said, "Omission of capital gains on units of mutual funds switched doesn't reflect in the bank statement and hence it's advisable to an income taxpayer to submit his or her capital gains statement while filing his or her ITR. Not doing this falls under the purview of concealment of income which is may lead to punishment under the Section 169 which has provisions to levy penalty on the income taxpayer to the tune of 50 per cent to 200 per cent inclusive of the interest in the late payable income tax amount."
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