Do you ever get that nagging feeling that something is just not right with that tax return you filed? Does it eat you inside out that you may have entered your spouse’s bank account number instead of your own?
You’re not alone.
Here are 10 of the most common errors people commit while filing tax returns.
Use of proper ITR
Different ITR forms are introduced by the Income Tax dept to facilitate different categories of taxpayers. Choosing the wrong ITR can result in your return being deemed defective. Frequent changes in the forms make it more difficult to determine the form right for you. However, it is in your interest that you keep track of the changes and at the same time, obtain advice from a Chartered Accountant/Tax Return Preparer or an online filing website.
Until a few years back, one had to stand in long queues to file their IT returns. Not anymore. The IT department has introduced e-filing process to make the entire process of tax filing simpler. In addition, it is mandatory for all those individuals whose income exceeds Rs.5,00,000 to file their returns online only. So ensure that you are doing it in the correct way. While certain sites charge you for filing returns online, the Income Tax dept website does not charge anything.
Appropriate slab for Tax Deducted at Source
Income from interest on bank deposits, non-convertible dentures, company bonds or deposits is taxable at the slab applicable to our income. Typically, banks or interest paying agencies deduct tax only at the base slab of 10%. So, if you fall in any higher slab, additional tax would have to be calculated and paid.
Cases of clubbing income
Change of jobs is a very common feature these days and each of your employer issues a separate Form-16. Taxes deducted are also at the slab that is applicable to salaries earned at each of the companies. However, the clubbed income may result in a higher tax slab. In these cases, the onus is on the individual to club both the incomes and pay additional tax, if any. Failure to do so may result in payment of interest and penalty at a later date.
Reconciling records with Form-26AS
All tax deducted at source, or additional tax paid by an individual is reflected in Form-26AS. It is also known as the consolidated tax statement. All those who deduct tax are supposed to book it against your PAN number. The Income Tax Dept strictly goes by the records present in this form for all tax deductions. All details that you provide in your tax returns regarding taxes paid should have corresponding entries in Form-26AS. Always reconcile your records with the records in Form-26AS before filing tax returns.
Not filing returns at all
The government allows a certain limit up to which tax liability is zero. However, this does not mean that if your income is lower than the threshold slab, you need not file tax returns. A few years back, there was a provision of exemption for individuals whose income did not exceed Rs. 5,00,000 (subject to certain conditions). There are some conditions like the interest income from bank being reported to your employer and the employee deducts adequate tax for that. But as banks give interest certificate almost at the end of a financial year, it makes the process difficult. So it is always better to file your returns whether or not you have taxes to pay.
Not listing all sources of income
An individual derives income from various sources like salaries, capital gains, house rent, dividends interest and more. Some of them are taxable while some like dividends, interest from PPF, tax free bonds etc are not taxable. Just because they are not taxable does not mean you can exclude them from your returns. In this context, it is equally important to declare interest from savings account in excess of Rs.10,000.
Payment of advance tax
As per Income Tax rules, any individual whose annual tax liability is in excess of Rs 10,000 is liable to pay tax in advance, every quarter. Wondering why none of us actually do it? The reason is, our employers and other interest paying agencies are doing it for us. However, if you are self-employed or earning extra income or a one-time income from sale of property or shares etc, you need to make quarterly filing. At these times, an individual has to self-assess his tax and pay appropriate amount of tax. Failure to do so will result in charging of 1% additional per month as penalty.
Getting your assessment year right
This is quite a simple one, but at times, we end up mentioning the wrong year. Financial Year and Assessment Year are two different terms. While Financial Year is the year in which the income has been earned, Assessment Year is the year when the assessment for the same is carried out. Assessment Year is always the year following the financial year. For example, for the current Financial Year 2014-15, while the Assessment Year is 2015-16.
Not sending ITR-V or sending by wrong methods
Before you sigh with relief for having filed your tax returns, do not forget to take a print of the ITR-V, which is the acknowledgement the Income Tax dept sends you. After printing the same, sign it and send it to the Central Processing Centre of the Income Tax dept. Please note that couriers are not accepted here. This is to be sent within 120 days of filing your tax return
So, this year when you file your Income Tax returns, keep these pointers in mind to ensure quicker assessment of our returns.