Common Mistakes &errors while filing Income Tax Returns

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Common Mistakes & errors while filing Income Tax Returns

The deadline is not far away & final countdown for filing the income tax returns has begun. In a haste to file to Income Tax Returns, lot many errors & mistakes are committed which results in different consequences. From invalidation of returns to levy of penalty, from denial of refund to issue of notices/ demands, are mostly the results of mistakes during the course of ITR filing.

Following are some of the precautions which taxpayers must consider while filing income tax returns:

  1. Casualness in filing income tax returns often results in either under-report or misreporting of income. Taxpayers need to be more cautious so as to incorporate all income, even exempt income, in the ITR forms. Various incomes like Interest of Saving bank account, FDR interest income, Minor’s income which is required to be clubbed with the income of the parents, etc are often ignored by the salaried taxpayers while filing income tax returns. Similarly, exempt income like LTCG on shares, Dividend, LIC Money back, PPF Interest, etc are ignored by taxpayers for the reason that it is tax neutral. However, reporting serves the dual purpose as it provides the evidences of subsequent investments by the taxpayers & results in avoidance of notice by the department. Similarly, taxpayers need to offer not only actual income for taxation but also notional income like deemed rental income if taxpayers owns more than one house property, gift if the amount exceeding Rs. 50,000/- is received from unspecified relatives, etc.
  2. Statistics shows that major chunk of returns are filed in the last days. However, there are at times genuine reasons for the delay like non availability of TDS credit in 26AS, delay in the investment in 5E4EC bonds or capital gain deposit account scheme, etc. One of the biggest mistakes committed by the taxpayers is “Waiting for the last minutes” or “waiting for date extension” for filing income tax returns. One needs to understand that Software, servers, systems, professionals have their own limitations & priorities. There are instances where the penalty is imposed even due to the failure at the portal of income tax department.
  3. The practice of enclosing documents with the ITR forms has been done away long ago. Now, no documents are required to be submitted/ attached with the ITR and the deductions/exemptions/incentives are abruptly granted to the taxpayers without documentary evidences. Few taxpayers claim more deductions/exemptions even though the same is not legally allowable. It may be noted that taxmen have right to call for the documents /records for verification. Taxpayers should avoid temptation to evade taxes by making false claims towards deductions & exemptions. Even genuine mistakes in claiming deduction can lead to penal consequences. For example, investment in tax saving mutual fund (ELSS) & not all mutual funds is eligible for deduction u/s 80C. Be careful & make claim for genuine deductions only.
  4. Income tax department have a very transparent mechanism as far as the Tax credit & various other information of the taxpayers are concerned.  Various details are reflected in Form 26AS. Taxpayers should invariably check 26AS before filing the income tax return.  26AS shows entries of TDS, advance-tax, income tax refund, AIR etc during the year. Any discrepancies in Form 26AS like wrong TDS credit or TDS credit not pertaining to taxpayers etc should be notified immediately to the deductor & get it rectified. While processing the return, Income Tax Department totally rely on 26AS & deny credit of TDS claimed in ITR if it is missing in Form 26AS. Further, if any entry is available in Form 26AS which is missing in the ITR filed, a tax notice is issued seeking reason for not reporting it in ITR.
  5. Selecting the correct form of Income Tax Return for filing income tax is very relevant for proper reporting. There are 7 returns forms for filing income tax returns of which ITR-5 is for AOP/Firms, ITR-6 is for Corporate Assessee and ITR-7 is for Trust. ITR 1 to ITR-4 are for individuals/HUF. Taxpayer need to be careful in selecting the ITR forms as improper forms may lead to incomplete information submission. Change in the ITR forms has become an annual feature and taxpayers should read the instructions about its applicability before preparing for it. For the AY 2018-19, Individuals having income from partnership firm are required to file return in ITR-3 & not in ITR-4 as was required in AY 2017-18.
  6. Recently, tax refund frauds in Bengaluru, Bhilai & other cities have shown the involvement of tax consultants in the process of return filing. Though the wrong claim or bogus deduction is abated by third person, taxpayers cannot plead ignorance. Don’t fall prey of such person or advertisement like file return for Rs. 100/- etc. Choose the right hand if not able to self file the return.
  7. Various returns, though filed timely & properly, gets invalidated if it remains unverified after filing. Uploading ITR is not the end of responsibilities. Rather, actual work starts only after filling it. After filing the return, taxpayers have to send the signed copy of acknowledgement (ITR V) to CPC, Bengaluru or have to e-verify it. E-verification is also an easy option if returns are filed by taxpayers themselves. At the cost of repetition let me mention that if return remained unverified, it is treated as null and void.

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