The Most Authentic Guide on Personal Finance and Investments


(Funny) Words of Wisdom : "My wallet is like an onion, opening it makes me cry." ~ Anonymous

11 Common Mistakes In Filing The Income Tax Returns

Financial Year 2017-18 ended last week. In a few months from now, we will have to take up the (unpleasant) task of filing the Income Tax Returns for the same.

In this regards, you would save lots of time, effort and future questioning from the Income Tax Department, if you avoid the most obvious errors in Returns filing.

Listed below are some of the blunders often committed by people in this process.

1. Errors in Personal Details
It is really strange but, some of the mistakes commonly observed, pertain to the personal details. It would, therefore, be advisable that you re-confirm whether you have correctly filled-in the PAN Number, Address, IFSC code, Bank Account No. etc. before you submit your Income Tax Returns.

2. Not reporting the Savings Account(s) interest
Interest, on the various Bank / Post Office Savings Accounts held by you, is exempt from tax up to a sum of Rs.10,000. However, this DOES NOT mean that you can ignore it for the purpose of IT Returns. No, you have to disclose the same and include it as 'Income from Other Sources'. Simultaneously, the same amount has to be shown as deduction u/s 80TTA in Schedule VI-A of the form.  

3. Not reporting interest on Fixed Deposits
People often forget — sometimes inadvertently, but sometimes deliberately — to add interest earned on various Fixed Deposits to their Total Income for the year; and pay tax accordingly. Earlier, one could easily hope that this won't be noticed by the tax authorities. However, now with almost every deposit linked to PAN, you will be easily caught and asked to pay the penalty.

4. Investing in the name of spouse and children
There is a clear cut provision in the Income Tax Act that you have to club the income earned by your spouse and / or children, out of the amount actually contributed by you. You cannot evade tax by investing "your" money in "their" name. Be prepared to get the Income Tax Notice if you try this age-old gimmick.

5. Income from previous employer
Job changes have become quite frequent nowadays. In fact, some of you may have worked in more than two companies in a given financial year. You must obtain Form 16 from all your employers. Thereafter, your must ensure that you include the income earned from all your previous employers while filing your Income Tax Returns.

income-tax-returns-errors
Expect a notice from the Income Tax Dept. for erroneous Returns.

6. Not reporting the income exempt from tax
Just because a particular income is not taxable, doesn't mean that you can ignore the same. No, there is a separate section in the Income Tax Return Form to report non-taxable income. Here you have to disclose income exempted from tax such as PPF interest, Dividends, Insurance receipts etc.

7. Not reporting income from properties
It is, nowadays, not uncommon for people to own more than one property. One of these would be self-occupied. Others fall under the purview of taxation. If the same has been rented, then rental income has to be obviously included in the Total Income. However, even if it is lying vacant or occupied by your parents etc., you have to pay tax on the notional rent that such a property would have otherwise fetched.

8. Errors in claiming deduction u/s 80C
You cannot claim deduction for home loan EMIs for under-construction property. After the property is ready, you can claim tax deduction for the EMIs paid. But you need to be careful. For the principal portion repaid, you can claim deduction u/s 80C (which has an overall limit of Rs.1.50 lakhs). Interest portion has to be deducted u/s 24 (which has a limit of Rs.2 lakhs). Or, for the EPF, only the employee's portion deposited has to be shown as deduction u/s 80C. There is no deduction for the employer's portion deposited. 

9. Not reconciling your income and TDS details with Form 26AS
Tax deducted at source — by your employer on your salary; on interest by banks; on rent; on professional fees etc. — is reflected in the Form 26AS. You must ensure that all your TDS payments have been correctly shown in the Form 26AS. If not, you need to get the same rectified. If your numbers and the numbers as per Form 26AS do not match, you may get the demand to pay additional tax or your refund may get delayed.

10. TDS is not full and final tax
Your liability to pay tax does not end with Tax Deducted at Source or TDS. It is merely advance tax collected by the Govt. at a specified rate. This rate may or may not be same as your marginal income tax slab rate. Hence, you may be either be eligible for a refund or be liable for payment of additional tax. For example, TDS on bank fixed deposit interest is only 10%. But if you are in the 20 or 30% tax bracket, you have to pay this difference.

11. Not filing your Returns in the correct Form
Income Tax Dept. has different Return Forms for different categories of tax payers e.g. salaried people without capital gains, salaried people with capital gains, persons earning business / professional income etc. You need to choose the right form applicable to you. It is not uncommon to find people filing their Returns in the wrong form. 

You Learn A Lot By READING... And Even More By SHARING.

Share Button

Ignorance is like a SIGNED BLANK CHEQUE... anyone can MISUSE it.

Subscribe via Email
Books by Sanjay Matai
[Click on the Pic for more info on my books.]
Powered by Blogger.

... TRIPLE BENEFIT ...

1. The best answer to 'Where should I invest my money'
Where to invest my money
The most honest and unbiased solution to your investment problem.

 


2. 51 Wasteful Money Habits Why We Fail To Become Rich
Wasteful Money Habits
You may be blowing away your money due to carelessness and stupidity.

 


3. Depreciation Loss in Vehicle Insurance? Think Zero!
Zero Depreciation Cover
Zero Depreciation Cover to leave you smiling among many disappointed faces.