Filing your income tax returns can be overbearing, whether you are a first-timer or a regular taxpayer there is always room for mistakes. The process of the income tax return consumes a whole lot of your precious time and making mistakes on top of it could result in many problems or a tax notice for the taxpayers.
The common mistakes that taxpayers often make while filing income tax returns are listed below
1. Filing ITR using the wrong form
According to tax laws, an individual is required to report all sources of income and file the income tax return using the correct form applicable to him.
If one files the tax return, using a wrong ITR form, then filed return will be treated as ‘defective’ and will be asked to file a revised ITR using correct form.
The taxpayer gets some time to rectify the mistake if this happens. The return which has been rectified must be filed within 15 days from the date of receipt of the intimation. The time limit may be extended by the assessing officer on an application by the assessee.
The defect should be rectified within the time limit, then the assessing officer will treat it as an invalid return. Moreover, the person may face penalties.
2. Not reporting interest incomes
One should report all the interest incomes received or accrued due to him in the previous financial year (for which the return is being filed) while filing his tax returns. Don’t forget to report interest earned from savings bank account, fixed deposits, recurring deposits, etc. under the head ‘Income from other sources’.
While interest received or accrued on fixed and recurring deposits are fully taxable, you can claim tax relief on interest earned from the savings bank account up to a certain limit.
3. Not filing income tax returns
People usually don’t file their income tax returns because they have long-term capital gains which are tax-exempt and without this their gross total income is below the tax-exempt income level.
According to the recent amendments, if one exempted his/her long-term capital gains along with gross total income exceeds the minimum exemption level, they are required to file income tax return.
Earlier it was not required to file income tax return as if total income was below the minimum exemption limit of Rs 2.5 lakh.
Now due to the recent amendment in tax laws, one is required to file ITR if gross total income plus long-term capital gains (Rs 1 lakh + Rs 2 lakh > Rs. 2.5 lakh) exceeds the minimum exemption limit.
4. Not clubbing incomes
The taxpayer is required to add income of stated persons such as minor children, spouse, son’s spouse, etc. to their own income and the tax payable by them is calculated on the total of the two incomes as per the rules of clubbing of Income.
This is particularly in the case when the income of the minor child is added to the income of his/her parent.
The Income Tax Act states the provision of clubbing of incomes. When in the case where minor’s income gets clubbed with that of any parent, he/she can claim exemption up to Rs. 1,500.
In case if you miss reporting this income (of a minor child) you may have to pay the tax due, along with interest and you may even be subjected to a penalty.
5. Not reporting income from the last job
If one has changed jobs in a financial year then income from the earlier job should be reported while filing income tax return along with income from the ongoing job.
If any income from the past job is not reported, then a discrepancy is bound to reflect in your TDS certificates, Form 16 and Form 26AS. This makes it bound to bring a taxman to your door.
6. Not reporting tax free incomes
A taxpayer’s, duty is to report all the income even if some is tax-free. Interest earned from a provident fund or/and tax-free bonds in a financial year must be reported in ITR.
However, one can claim exemption under various sections of the Income Tax Act. These exempt incomes should be reported in the ‘Exempt Income’ schedule of the ITR.
7. Not reporting all bank accounts
From the assessment year 2015-16, a taxpayer is required to report all the bank accounts held by him in the previous year in his/her income tax return.
In Earlier days, it was only required to mention a single bank account in which one wished to receive a credit of the income tax refund if any but nowadays only the dormant accounts are removed from the requirement of reporting in the ITR.
8. Not declaring deemed rent/expected rent
If one owns another house apart from a self-occupied house and it is lying vacant, then it should be reported. And not reporting may lead to penalties as stated above.
But in the cases where there is interest payable on the housing loan for the said property it may result in some tax savings.
9. Failing to revise your income
If any mistake is found once filing tax has been completed, then it must be rectified.
One must file the revised return to rectify the mistake. Current income tax laws allow two years to file the revised returns.
But from the financial year 2017-18, a taxpayer will get only one year after the end of the relevant financial year.