13 Most Common Mistakes while Filing Income Tax Returns
The attention we give to playing Angry Birds is not the same we give the screen while filing out income tax returns. Tax payers wait for the deadline to file ITR and eventually file it in haste, because of which mistakes are bound to occur.
Here are most common mistakes which should be avoided while filing your ITR:
1. Selecting Wrong ITR Form
The most common mistake which an assessee commits is choosing the wrong form for filing income tax return. Various Income Tax return forms are notified by the IT department for filing income tax return.
|Income Tax Return Filing Mistakes|
Selecting a correct form is very essential for proper filing of income tax return.
ITR 1 (Sahaj):
To be filled up by individuals with salary, pension, rental income from one property, tax-free capital gains and income from interest.
To be filled by individual and HUFs with salary, pension, rental income from more than one property, taxable capital gains, income from interest and foreign assets.
To be filled by partners in a firm with interest, salary, bonus, commission, capital gains, more than one property.
To be filled up by individuals and HUFs with income from business / profession with gross receipts more than Rs. 60 Lakhs a year. (If gross receipts are less than Rs. 60 Lakhs, but the income is less than 8% of gross receipts, still ITR 4 to be used).
ITR 4S (Sugam):
To be filled up by individuals and HUFs with income from business / profession and gross receipts upto Rs. 60 Lakhs a year.
Remember this is “V” and not 5. This is an acknowledgment form and is to be filled by all the above mentioned categories.
Also, make sure that you upload the form as per the correct assessment year (AY).
2. Not disclosing all Incomes (don’t ignore or leave any)
While most salaried taxpayers seek to disclose only their salary income, it is important to report income for other heads, such as savings bank account income (the deduction up to R10,000 is only applicable from FY13).
Even though long-term capital gains and dividend from equity, Mutual Funds and listed securities are not taxable, they form a part of your income from other sources and you need to provide their details in the return form.
If you own more than one house, you are liable to pay a certain amount as tax, even if you have not earned any income from it or if it is unoccupied.
3. Entering Wrong Information:
You miss filling in one number or character of your permanent account number (PAN) and the form cannot be processed. Besides, you could be fined R10,000 for an incorrect entry.
In respect of tax deducted at source (TDS), it is mandatorily required to furnish the TAN no. of the deductor. If the TAN no. of the employer is not wrongly entered then you will not get the credit of your tax deducted.
Tax slabs are impacted depending on if you are a resident/non-resident individual or male/female, so calculate your taxes based on the applicable slab rates and special rates if applicable.
“Note that in case of e-filing of returns, the furnishing of bank account particulars is mandatory even if no refund is due. In case of refund, it is advisable to go for e-filing of returns to ensure faster processing,” says Suresh Surana, founder, RSM Astute Consulting.
If the taxpayer provides wrong jurisdiction which is obtained from the Income Tax site through the PAN of the assessee then delay is caused in processing of income tax returns or your return may be rejected by the Department.
- Other details like Email Address, MICR code, address for communication, phone number etc.
4. Not Signing the Form:
Not Sign at all:
Signing on tax return is a vital requirement to be undertaken by an assessee. Generally, assessees are in a hurry to file income tax return and they forget to sign & submit the ITR in case of manual filing and ITR V in case of online filing of income tax return without DSC. This may lead to rejection of the ITR filed.
Signing a blank form:
In case you are hiring an agent to file returns on your behalf, kindly make sure to go through the form after the agent has filled it. Signing a blank form and leaving it completely on the agent is not a recommended option. Even a typing error could spell trouble for you.
5. Ignore Multiple Form 16:
If you’ve changed jobs in the middle of a fiscal year, ensure that you collect Form 16s from both employers. If you have not shown your savings with the previous employer to the present employer, there is a chance of paying extra tax, especially if you are in the high income bracket.
6. Not Verify TDS with Form 26AS
Do check the TDS and advance tax credit available against your PAN in your 26AS on the income tax website. Should your tax computation lead to a tax liability over and above your TDS and advance tax credit available, ensure prompt payment along with applicable interest.
7. Not Recheck Deductions
Many individuals include ‘Employer’s Contribution’ to PF also under Section 80C. Remember, it is only the ‘Employee’s Contribution’ that qualifies for Section 80C. Another common mistake is that some people provide the entire home loan EMI amount under Section 80C or 24B, while the correct way is to put the principal amount under Section 80C and the interest amount under Section 24B. There are some other lesser known deductions like Section 80E, 80G, 80DD etc. which need to be mentioned in your return form.
8. Ignoring Reversal of Deductions:
If you sell your house within five years of getting its possession, the deductions availed on the home loan are reversed. “Any installment or part payment of amount due under self-financing schemes is allowed as deduction under section 80C. However, if you sell the house within five years of getting possession, all the deductions claimed on this house would be deemed to be income in this year and you need to pay tax on it,” said Sharma.
9. Attaching supporting documents with ITR-V
The income tax department’s e-filing website clearly states that no annexure, covering letter or pre-stamped envelopes is to be sent along with ITR-V (ITR-Verification, or acknowledgement, form). “No supporting documents are to be attached to the tax return; these are to be furnished only when called for by the tax office,” says Srinivasan.
10. Filing Delayed ITR
Delayed ITRs cannot be revised later, even if you realize some mistake. Filing on time becomes extremely important for people having tax losses, otherwise the benefit to carry forward these losses to offset future income is lost.
11. Not hold copy of the Return
A copy of Income tax return and Acknowledgement should be maintained by you who would be helpful in ensuring rectification of mistakes and will be helpful during audit process, if any, being conducted by the department in the near future.
12. Forgets sending e-filing acknowledgement
You should remember to take a printout of ITR V, sign it and send it to the Income Tax Department’s Bangalore office within 120 days. Unless you send the acknowledgement, your E-filing is not treated as complete. Another thing to remember here is that ITR V is to be sent by normal post or speed post (and not through courier).
13. No filing at all
Filing tax returns is in your own interest. Tax filing helps you in availing any kind of loan, visa and immigration processing, income proof / net worth certification or even applying for high Life Insurance Cover. So, just avoid this biggest mistake of all – simply not filing a return.
We suggest you take the e-filing route through tax portals; these have software that prompts you to correct common mistakes. Some portals simply ask you for a scanned copy of Form 16, Form 16A, and copies of income from other sources; the software detects the data and fills the form automatically.
Final Words of Wisdom:
The importance of filing correct and accurate returns cannot be any less emphasized. Neglecting to pay attention to details can end up making taxes even more costly or delays in refund. While, some of these mistakes would end up in you getting a notice from the tax authorities, others would expose you to risks of heavy penalties and punishments.