10 common mistakes to avoid while filing ITR
ITR: Being professionals or non- professionals, mistakes can be made by anyone. “Sometimes we should act wise by learning from other’s mistake by not committing the same. Isn’t it Smart?” If you wanna minimize the chances of being invited by Income tax department regarding Income Tax Returns (ITRs); do checkout some of the common mistakes made by the tax return filers in their ITR. Here are some of the frequently made mistakes –
Common Mistakes to avoid when filing ITR
1. Failing to File ITR
The biggest mistake is failing to file ITR. Its very important for a person to file ITR when their income exceeds basic exemption limit or when they have asset or financial interest in an entity located outside of India or in many more cases. If you file your ITR after the deadline, then a late filing fee will be levied. Due date for ITR has been extended twice- first from July 31 to November 30, 2020 and then to December 31, 2020. It is advisable to file your return before the due date i.e. December 31, 2020.
2. Incorrect Personal Details
Details in the ITR should match with the details of PAN and AADHAR CARD. In case of mismatch, you might be contacted from ITO for furnishing the correct information.
Read Also: ITR: 5 common bank transactions mistakes to avoid in tax return
3. Claiming Of Fake Deductions
Sometimes taxpayers claim fake deductions or inflate the deduction to reduce their tax liability. This claiming of fake deduction should be avoided as if caught, then it will be added in income and then liability will be calculated. Penalty can also be imposed as punishment.
4. Ignoring 26 AS and TDS certificate Mismatch
An employee undoubtedly should cross-check the details of Form 16 with form 26AS, issued by the employer. Form 26AS includes all the details of your income, TDS, advance tax paid by the employee till date.
Read Also: ITR Guide: 15 Guidelines for Preparation of Balance Sheet and Profit and Loss
5. Not filing returns if tax has been deducted
Employers and banks deduct tax at source on salary and interest income respectively. It is mandatory to file return when annual income exceeds Rs.2.5 lakh. Income on which tax has been deducted and claim credit for TDS in the income tax return should be disclosed.
6. If tax deducted on interest income, Report in ITR
Savings bank accounts and fixed deposits are common now a days. Banks and financial institutions provide interest on such account balances. Banks deduct TDS on the interest credited on fixed deposits. Therefore, the interest income will come under Income from other sources. However, no TDS is charged on interest earned on savings account.
Read Also: 10 new Changes in Income Tax Return Forms for A.Y. 2020-2021
7. Failure to Reconcile TDS With Form 26AS
26AS includes all the income details, Tax Deducted at Source (TDS), advance tax paid by you, self-assessment tax, etc. Even employer deducts taxes at source on employee’s 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 Form 26AS, No credit for tax deductions can be claimed for that as it is 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 between your Form 26AS and Form 16 or TDS certificates may lead to less refund or more taxes payable.
8. Not Clubbing Incomes
As per the provisions of the Income Tax Act, an assessee mandatorily requires to club income of their spouse, children in certain cases with his/her total income. If an assessee does not include the income to be clubbed in his/her ITR, the department may serve a notice to the assessee for under reporting of income and the assessee would be liable to pay tax, interest and penalty on the same.
Read Also: Income Tax Return: Documents required for ITR filing
9. Not Verifying the ITR
After filing the return, it’s required to be verified, either e-verify the same either through Aadhaar-based OTP or through netbanking or demat account or manually courier the signed copy of the acknowledgment receipt (ITR-V) to CPC Bangalore. It needs to be done within 120 days, else it’ll be assumed invalidated.
10. Not reporting all bank accounts
While filing ITR, a taxpayer is required to report all the bank accounts held by him. Earlier, you were only required to mention a single bank account where you wanted to receive credit of the income tax refund, if any. However, now only dormant accounts are excluded from requirement of reporting in the ITR. This is because from this FY, it will depend on Income Tax department in which they will credit the income tax Refund.
Read Also: ITR-3 : Who can file itr 3 | How to file ITR 3?
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The author of the above article is Sneha Bhalotia.
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