Filing income tax returns (ITR) is an essential responsibility for every taxpayer. It ensures compliance with the tax laws of a country and helps individuals report their income, deductions, and tax liabilities accurately. However, the process of filing an ITR can be complex and overwhelming, leading to mistakes that can result in penalties or unnecessary audits. In this blog, we will explore some of the common mistakes made by income tax filers
1. Incorrect or Incomplete Information: One of the most common mistakes is providing incorrect or incomplete information while filing ITR. This includes errors in personal details, such as name, address, contact information, bank account details, or PAN (Permanent Account Number). It is crucial to double-check all the information before submitting the return to avoid any complications.
2. Failing to Report All Sources of Income: Many individuals forget to include all sources of income while filing their ITR. Apart from salary income, individuals may have additional sources such as interest income from savings accounts, fixed deposits, or recurring deposits, rental income from properties, or earnings from freelance work. It is important to report all sources of income, regardless of the amount, to ensure accurate tax calculations.
3. Ignoring Form 26AS: Form 26AS is a consolidated tax statement that reflects the taxes deducted on behalf of the taxpayer by various deductors such as employers, banks, or financial institutions. Ignoring or not verifying Form 26AS can lead to discrepancies in the tax credits claimed and may result in additional tax demands or delays in refunds. It is advisable to review Form 26AS before filing the ITR to ensure that the taxes deducted are correctly reflected.
4. Neglecting to Claim Deductions: Tax deductions help reduce taxable income, resulting in lower tax liability. Some individuals fail to claim eligible deductions, such as investments in tax-saving schemes like Public Provident Fund (PPF), National Savings Certificate (NSC), or tax-saving fixed deposits, payment of life insurance premiums, contributions to the Employees’ Provident Fund (EPF), or medical insurance premiums paid under Section 80D. Make sure to gather all the necessary documents and claim deductions appropriately to optimize your tax savings.
5. Mismatched TDS and Income: Tax Deducted at Source (TDS) is deducted by employers, banks, or other entities before paying out income to individuals. It is crucial to cross-verify the TDS mentioned in Form 16/Form 16A (provided by the employer or deductor) with the income reported in ITR. Any mismatch could lead to queries from the tax department and can be avoided by reconciling the TDS with the income earned.
6. Late Filing or Non-Filing: Many taxpayers delay filing their returns or completely overlook the filing process, assuming they don’t owe any taxes. Late filing can attract penalties and interest, while non-filing may result in legal consequences. It is essential to file ITR within the due dates prescribed by the tax authorities, even if there is no tax liability. Timely filing helps avoid unnecessary penalties and ensures compliance with tax laws.
7. Forgetting to Report Exempt Income: Exempt income, such as dividends from mutual funds, long-term capital gains from the sale of certain assets, or interest earned on tax-free bonds, should also be reported in the ITR. While these incomes are exempt from tax, they need to be disclosed to provide a comprehensive view of the taxpayer’s financial profile.
8. Not Preserving Supporting Documents: It is crucial to preserve the supporting documents related to income, deductions, investments, and expenses for a minimum of six years from the end of the relevant assessment year. Failure to maintain these documents can result in difficulties during tax assessments or audits.
Frequently Asked Questions (FAQs):
Q1. What documents are required for filing ITR?
A1. The documents generally required for filing ITR include PAN, Aadhaar card, Form 16/Form 16A, bank statements, investment proofs, rent receipts, home loan interest certificates, and details of other income sources.
Q2. Can I file ITR without Form 16?
A2. Yes, you can file ITR without Form 16 by collecting salary slips, bank statements, and other relevant documents to calculate your income and deductions. Form 16 is not mandatory but serves as a convenient document for salaried individuals to report their income and taxes deducted.
Q3. Can I file ITR for multiple years together?
A3. If you have missed filing ITR for multiple years, it is recommended to file the pending returns at the earliest to avoid penalties and legal consequences. You can file the returns for the previous years by selecting the appropriate assessment year while filing.
Q4. How can I rectify errors in my filed ITR?
A4. In case of any errors or omissions in the filed ITR, you can file a revised return under Section 139(5) of the Income Tax Act within the specified time limit. The revised return replaces the original return and helps rectify the mistakes made earlier.
Q5. What is the penalty for late filing of ITR?
A5. The penalty for late filing of ITR depends on the total income and the period of delay. For individuals with a taxable income of up to ₹5 lakh, the penalty is ₹1,000 if the return is filed before December 31st of the assessment year and ₹10,000 for returns filed after that. For individuals with a taxable income exceeding ₹5 lakh, the penalty increases to ₹5,000 if filed before December 31st and ₹10,000 thereafter.
Filing income tax returns accurately and on time is crucial for every taxpayer. By avoiding common mistakes such as providing incorrect or incomplete information, neglecting to report all sources of income, ignoring deductions, or failing to cross-verify TDS and income, individuals can ensure a smooth filing process. It is important to stay updated with the latest tax regulations and seek professional advice when needed. Remember, filing ITR accurately demonstrates responsible citizenship and contributes to the nation’s progress.