The mere mention of the word “tax” can leave us flummoxed, with most of us trying to distance ourselves from anything related to it. While a few have found ways to evade tax, more often than not the law has caught up with them, and getting an income tax notice can send us into a tizzy. While we all find reasons to complain about having to pay income tax, the fact remains that it is this money which goes into bettering our country, with each taxpayer playing a certain role in the development of India.
All said and done, the entire process behind filing Income Tax Return (ITR) can be stressful, with it possible for mistakes to creep in. While some of us might rely on experts to guide us, the truth is that filing your IT return isn’t as hard as it sounds, for the government has simplified the process. While it is only human to make errors in life, making errors while filing your IT return can have undesirable consequences, which makes it imperative for us to avoid these common mistakes when we do decide to file them.
1. Using the wrong ITR form – This is perhaps the biggest blunder one can make while filing the IT return. There are currently 7 ITR forms to choose from, with each designed to cater to a specific audience. Choosing the wrong form can result in the IT department rejecting it, which could lead to complications in the future.
ITR 1 – This form is designed for individuals who earn an income either in the form of a salary, through a property, or any other source, subject to the total income being a maximum of Rs.50 lakh.
ITR 2 – Use this form if you are an individual or Hindu Undivided Family (HUF) who has an income which is not from a proprietary business/profession.
ITR 3 – This can be used by individuals/HUFs who have an income which comes from a proprietary business/profession.
ITR 4 – This can be used by people who have presumptive income either from a business and/or a profession.
ITR 5 – This form is designed to be used by entities who do not fall under the category of HUF, company, individual, or those using ITR 7.
ITR 6 – This is designed for companies which do not claim exemption under section 11 of the IT Act.
ITR 7 – This is for designed for people/organisations who have to submit returns under Sections 139(4A)/4B/4C/4D/4E/4F of the IT Act.
2. Failing to include income from other sources – A number of us might have investments which offer generous returns. Some of us might have a fixed deposit in a popular bank which offers a decent rate of interest. Failing to include this income in the ITR can result in it being rejected, for the interest income is taxable. It is important that we pay attention to all our sources of income and mention any income from these sources (if any) while filing the ITR.
3. Providing incorrect personal information – Typos are something which are extremely common, but making a typo when filling your ITR can leave you with a bad headache. Entering incorrect personal information like the wrong address or old email ID could result in official communication from the department failing to reach you. Also, making a mistake while entering the PAN will result in the ITR being rejected.
4. Entering the wrong assessment year – There are cases where people have failed to file the IT returns for a particular year, hoping to file the same in the future. While it is possible to do so, it is important to enter the correct assessment year while filing the ITR. Choosing the wrong assessment year could result in double taxation.
5. Failing to claim deductions – A number of us invest in instruments which offer tax savings. While a few might have purchased a life insurance policy to enjoy tax benefits, other might make payments to charities to save tax. Alternately, even the premium you pay towards your health insurance policy can help you save tax.
Whatever the investment is, it is important to check the tax benefits associated with the same. Additionally, it is important to realise that mere investment in these instruments is not sufficient to save taxes, we need to mention the same when we file our ITR to enjoy their benefits.
6. Failing to verify Form 26AS – This is perhaps the most common mistake we make while filing our ITR. Tax deducted at source (TDS) can be hard to comprehend, with most of us choosing to ignore all paperwork surrounding it. Form 26AS provides information pertaining to the tax credit of a person, and this should be verified in order to rule out any discrepancies regarding TDS. Discrepancies, if any, could result in an individual paying more tax/missing out on a refund.
7. Not verifying the ITR – The process of filing returns does not end by merely submitting the return. The return needs to be verified in order for the department to go ahead with the formalities. Do not forget to verify the ITR before the last date.
Verification can be done either online or offline. The department will not consider returns which are not verified.
The struggle to make money is real, with it being just as hard to save it. Paying taxes might not be the first thing on our mind but it is a duty which every eligible citizen should fulfil. Avoiding these basic errors can help us complete our responsibility without worrying about the formalities associated with the same.