Filing Income Tax Returns – Common Mistakes

By    Archit Gupta Founder and CEO, Clear

The due date for filing of tax returns for individual taxpayers is 31st July of the assessment year. Putting it off until the last minute and filing it in a hurry can lead the taxpayer to disclose incorrect information which might have a negative impact on the outcome of filing of returns. Returns can either be filed manually or can be filed online. In fact, e-filing of a tax return is mandatory from FY 2016-17 onwards if you have a refund claim in the return or have a total income of more than Rs. 2,50,000. We have listed below some of the most common mistakes taxpayers make at the time of filing tax returns:

Selecting the Incorrect Form

It is of utmost importance to select the appropriate ITR form for filing of returns. Failure to do so can result in your return not getting processed by the income tax department. The selection of ITR form is based on the nature of income or the category to which the taxpayer belongs. In case a taxpayer has filed an incorrect return form, he is most likely to receive a defect notice from the department which must be rectified within the specified time limit. Example: If you are a salaried individual with income below Rs 50 lakhs and with no capital gains income, the appropriate form for you is ITR 1, while it is ITR-3 if you are an individual having income from business or profession. To know more about the different ITR Forms and which ITR you must file, visit the ClearTax portal. By using an e-filing platform like ClearTax, you do not have to worry about choosing the right form, as this is done automatically by the software.

Quoting the Wrong Assessment Year

While filing the returns, one must make ensure to provide the correct AY. For FY 2018-19 the correct corresponding AY is 2019-20. Mentioning the wrong AY increases the chances of double taxation and attracts unnecessary penalties.

Furnishing Incorrect Personal Information

It is essential that personal details viz name, address, mail id, phone number PAN, date of birth etc are accurately mentioned in the return of income. You need to ensure that the details tally with those given in your PAN. Further, if you are looking at claiming a refund, make sure your bank particulars to which you intend your refund to be credited, like account number, IFSC code etc are accurately mentioned in order to receive your refund on time and without hassles.

No need to file returns if tax has been deducted

Employers and banks are required to deduct tax at source on salary and interest income respectively. It is mandatory to file an income tax return when your annual income exceeds Rs.2.5 lakh. You should disclose the income on which tax has been deducted and claim credit for TDS in the income tax return.

If tax is deducted on interest income, it need not be reported in ITR

Taxpayers generally have a savings account. Some taxpayers also have fixed deposit accounts with banks. Many taxpayers prefer to use savings bank account/fixed deposit account as a tool for their savings. Banks and financial institutions provide interest on such account balances. Banks deduct tax or do a TDS on the interest credited on fixed deposits. There is no TDS on interest earned on savings account. However, both the interest credited to the savings account and the fixed deposit account are your income from other sources. Taxpayers have to report the interest income while filing their income tax returns. Taxpayers can claim a deduction under section 80TTA  up to Rs 10,000 for interest earned on their savings account. In the case of senior citizens, a deduction can be claimed under section 80TTB for interest up to Rs 50,000. Taxpayers can also claim a credit for TDS while filing their income tax returns.

Not Disclosing All the Sources of Income

If there is any income from any source other than the primary source of income, it must be disclosed. Taxpayers have to disclose income from all the sources including savings account interest, fixed deposit interest, rental income from house property, income from short-term capital gains and any other source. The income must be disclosed irrespective of being taxable or exempt. Many taxpayers out of ignorance, tend to miss out on giving details of exempt income.  Example: : Although the capital gains  are exempt from tax up to Rs 1 lakh in case of equity shares or equity-oriented mutual funds, the details of the gains have to mandatorily be mentioned in the schedule applicable for capital gains. Not doing so may be questioned by the tax authorities.

Entering the correct details manually

The ITR forms carry a number of rows and columns that need to be filled out at the time of filing one’s income tax returns. The details have to be entered in a particular format, which if not done properly can lead to errors in the returns. For example, dates have to be entered in the DD/MM/YYYY format only. If the date is entered in any other format, the returns would be incorrect.

Failure to Reconcile TDS With Form 26AS

It is important to check Form 26AS before filing the ITR. Form 26AS includes all the income details, Tax Deducted at Source (TDS), advance tax paid by you, self-assessment tax, etc. Your employer may have deducted taxes at source on your salary. A salaried person must cross verify the details with Form 16 issued by the employer with the Form 26AS. In a case where the TDS is not reflected in your Form 26AS, you will not get a credit for tax deductions that are not mentioned in Form 26AS. It is the taxpayer’s obligation to make sure that the information in Form 26AS is up-to-date and correct. Mismatches as between your Form 26AS and Form 16 or TDS certificates may lead to less refund or more taxes payable.

Form 16 from two or more employers

Whenever a taxpayer changes jobs, they end up with different Form 16s from each employer at the time of filing their tax returns. Filing returns with multiple Form 16s can be tricky and taxpayers are often not sure about how to do it. In such cases, taxpayers have to aggregate their incomes from both the employers under their income from salary.

1HRA not given by employer

If an individual doesn’t submit the rent receipts with the company HR, he or she won’t be able to get house rent allowance. Often, taxpayers are not aware that they need to have their landlord’s PAN to avail the HRA benefit. Taxpayers can calculate and claim HRA exemption at the time of filing of their income tax returns.

Calculating the deductions that can be claimed

Taxpayers are allowed to claim deductions of up to Rs 1.5 lakh in a financial year by way of certain investments and expenses. But how much can be claimed from what source is a tricky thing to figure out. Often, taxpayers are also not aware of some expenses that are eligible deductions.

Not Paying Advance Tax/ Self-Assessment Tax

31st March of every year is the last date of a financial year. It is always advisable to pay your taxes within due dates to avoid paying interests and penalties. Therefore, a taxpayer must ensure that the tax dues are cleared on or before 31st March of the financial year. Failure to do so attracts an interest of 1% per month starting till the dues are cleared.

Donations are 100% exempt

Taxpayers have a common notion that donating money will fetch tax benefits. You need to know that not all donations are eligible for 100% tax exemption. Some are eligible only for an exemption of up to 100%, others are eligible for 50% deduction. Taxpayers have to verify the donation receipt and claim deduction while filing their ITR.

Interest on NSC is tax-free

If you think that the interest earned on National Savings Certificate (NSC) is tax-free, you are wrong. The interest is fully taxable. Although this interest can be claimed as a deduction under Section 80C for all the years (except the last year), you must make it a point to mention this income as ‘income from other sources’ to get the benefits of Section 80C. Otherwise, you may have to end up paying taxes for it.

Failure to Dispatch ITR V On Time

After you successfully e-file your income tax return, please e-verify your ITR-V via Netbanking, Aadhaar Card or through the EVC process on your mobile number and email. It is important to verify your return because the IT department will start processing your returns only after they receive the verification. For some reasons, if you are unable to e-verify your return, you can sign and send the ITR-V to the CPC via ordinary or speed post only. This has to be done within 120 days from the date of e-filing of a tax return