The Income Tax Return (ITR) filing has started for Financial Year 2022-23 or Assessment Year 2023-24. The income tax (I-T) department has enabled the online ITR-1, ITR-2, ITR-3 and ITR-4 forms with pre-filled data for the assessment year 2023-24. The due date for Filing ITR of AY 2023-24 is July 31, 2023. While filing ITR has several benefits, making mistakes in it can result in several complications. One should take extreme care while filing Income tax return.
10 mistakes to avoid while filing ITR for AY 2023-24
1. Choosing wrong ITR form
There are different forms prescribed for different types of taxpayers. For example, ITR-1 is applicable only for resident individuals having income up to Rs 50 lakh and only for those having income from salary, one house property and other sources. Similarly, there is ITR-3 which is applicable for income from business or profession and ITR-4 for the presumptive method of taxation such as for freelancers. So, taxpayers should be careful while choosing the Income Tax Return form.
An incorrect form will make the ITR form ‘defective.’ You could get a notice to file revised returns and this could also result in your returns being treated if you fail to respond on time.
2. Mismatch in details provided to the IT department
Ensure that you check Form 26AS and the Annual Information Statement (AIS) before you start filing your Income Tax returns. The both can be found on the income tax department’s e-filing portal – incometax.gov.in. Also make sure that the details of tax deducted at source (TDS)
and certain high-value transactions like cash deposited, FDs, immovable property transactions and so on tally with your Form 16, bank account statements and other financial records. Any discrepancy or mismatch can result in you receiving a notice from the income tax department as the officials will consider the figures mentioned in Form 26AS.
3. Quoting wrong assessment year in Income tax return
While filing the returns, one must ensure to provide the correct assessment year. For FY 2022-23 the correct corresponding AY is 2023-24. Mentioning the wrong AY increases the chances of double taxation and attracts unnecessary penalties.
4. Not reporting income from the previous employer
One has to be even more careful while filing returns if you have changed jobs during FY2022-23. Such taxpayers will have more than one Form 16 issued by their current and past employers. You need to declare the income earned from both companies. The AIS has all your income details, so data from both Forms 16 will get reflected. Be transparent to avoid tax notices for failing to declare all income.
5. Filing Income tax return without using all sources of income
While computing the ITR, it is vital to take into account all sources of income whether from the previous or current employment or income from investments and file it under the appropriate ITR form. If any income (from previous job) is not reported, then a discrepancy is bound to reflect in the TDS certificate (Form 16) and Form 26AS. The tax department can send a tax demand notice asking taxpayer to pay additional tax dues, if any.
6. Non-declaration of income from capital gains on sale of assets
The ITR requires complete details of the sale of capital assets, purchase and expenses to calculate the capital gain. Also, in case the taxpayer makes investments to claim capital gains exemption, the details of the investment and capital gains exemption should be given. The way how your capital gains are treated differs depending on the income source or asset class. Since the rates and conditions vary, calculating capital gains is one area where taxpayers tend to make mistakes.
For example, capital gains on the sale of equity shares or equity mutual fund units attract a 15% tax if the units or shares
are sold within a year. If you hold your investments for a longer period, the tax applicable is 10% for gains exceeding Rs 1 lakh during the financial year. In FY23, capital gains arising from the sale of debt fund units are treated as short-term gains if the holding period is less than three years. However, if the holding period is longer, they are subject to 20% taxation with indexation benefits.
7. No reporting of income from investments such as interest income
A taxpayer should report interest income from fixed deposits, savings account, post office saving schemes, bonds and other investments. The interest from savings accounts is also eligible for tax deduction up to Rs 10,000 for taxpayers who less than 60 years of age. In the case of senior citizens (60 years and above), the interest from fixed deposits, savings accounts and post office deposits is eligible for tax deduction up to Rs 50,000.
8. No clubbing of minor’s income
In case the taxpayers have made any investments in the minor child’s name, they should include the income such as interest income as part of the income. The clubbing of income is generally with the parent whose income is higher. Taxpayers can can claim a deduction of up to Rs 1,500 per child up to two children.
9. Waiting for the last minute to file your ITR
Waiting for the last moment to file your Income tax return is never a wise idea. There are chances for you to skip the deadline because either you do not have all the documents or other necessary information that you need to fill in. There are also chances that the income tax department could face glitches because of heavy visitor flow as many taxpayers visit the website when the last date is approaching nearer. Thus, it is advisable to start the process well in advance. While you can file returns for FY23 until December 31, 2023, you will have to spend Rs 1,000-5,000 as late-filing fees.
10. Entering incorrect details
The ITR forms carry several 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. A taxpayer should declare all their bank accounts in India except dormant accounts. The taxpayer can choose the bank account in which they want to get their refund credited.
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