As a working individual, regardless of whether you are salaried, self-employed or in business, you have to pay income tax. That’s inevitable, no matter how much you dislike paying tax.
However, while filing income tax returns, you might make some mistakes that will eventually get you a tax notice. Let’s know what they are, so that you can prevent yourself from making those mistakes.
Filing ITR using the incorrect form:
According to the law, you have to report all sources of income and file ITR using the right form. If you use the wrong form, it will be treated as “defective” and you will be required to file a revised ITR using the correct form. A rectified return has to be filed within 15 days from the date of receipt of the information. You can ask the accessing officer to extend the time limit. Not rectifying the defect within the time limit will be treated as an invalid return. It is seen as not filing returns at all. You may even have to pay all penalties apart from the interest.
Not reporting interest income:
The interest income accrued in the previous FY has to be mentioned while filing tax returns. You might forget to report interest earned from savings bank account, FD, Recurring Deposits, and so on under the head ‘Income from other sources’. The interest is fully taxable but you can claim tax relief on interest earned from savings bank account up to some amount.
Not filing income tax returns at all:
Many people don’t file ITR either because they are just plain lazy or they have long-term capital gains which are tax exempt. According to recent amendments in section 139 (1) of the Act, if your exempted LTCG along with gross total income exceeds the minimum exemption level, you will have to file your income tax return
Lack of awareness about Tax Deductions:
Some salaried individuals aren’t aware about tax deductions. They forget declaring tax deductions to their employers. They are confused most of the time and aren’t sure if they should avail tax deductions or not and where and how to claim tax deductions. Sadly, they aren’t aware that eligible deductions can be claimed in ITR even if these were not considered by the employer. This is one reason why a taxpayer should research well before paying tax. He should consult and talk to people. Before investing or buying insurance anywhere he should ask about the available tax deductions.
Putting off the filing of ITR is another blunder many taxpayers commit. One single delay in filing ITR will cost you Rs. 5,000! Procrastination is a bad habit that hampers your progress, be it any field.
Hiding income from last job:
Income from past jobs has to be declared along with income from the current job while filing ITR. Do not forget or ignore this.
Hiding income from rent:
A taxpayer has to report all his bank accounts in his ITR. Except dormant accounts, all other bank accounts have to be declared.
Not reporting incomes that are tax free:
Regardless of whether a particular income is tax free or not, you have to report all the income you earned including interest earned from Provident Fund and tax free bonds.
Not combing income of mentioned people:
Adding income of stated persons like spouse, minor children, daughter in law, etc to your own income is necessary as the tax payable by them would be calculated on the total of all the mentioned incomes according to the rules of clubbing of Income.
Incorrect Assessment Year:
The Financial Year is the period in which you earn an income while the Assessment Year is the upcoming year when the income is taxed. The income you earn in FY 2018-19 will be taxed in AY 2019-2020.
These are ten mistakes you can avoid while filing for Income Tax Returns. For more information visit www.moneymindz.com or give a missed call to 022-62116588
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