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Common Mistakes People Make When Filing Income Tax Returns

  • Akshatha Sajumon
  • Aug 20 2021
  • 5 minutes
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Short bites to keep you informed of matters that impact your wallet and wealth

(The web version of our weekly newsletter)

 

Hey awesome people,

The tax filing season is here. We hope you are getting geared up to file your IT return. While you are at it, we thought it would be useful for you to know what are some of the top mistakes made by individuals while filing tax returns, so that you can avoid them.

Head over to the Top Bite section to know which are the top mistakes to avoid while filing your tax returns.


Top Bite this week

That time of the year is back when you scramble to find documents and proof for the income tax return filing exercise. In our last newsletter, we talked about the various ITRs available for you that you could use for filing your return.  We move to various mistakes that you can avoid.

Top mistakes to avoid while filing your tax return

 

Not using the right ITR

As you must remember, the IT dept allows seven different ITRs to account for different sources of income. Make sure you use the right ITR that matches your income sources. Filing under wrong ITRs may make it difficult for you to complete your return form successfully.

Missing out different sources of income

An individual can have many sources of income, some of which you may not pay adequate attention to, like, interest from a savings bank account or a running FD. Or it could be a capital gain when you redeemed a mutual fund or sold some shares or other assets like gold, etc.

It’s important that you take all these into account while filing tax returns and pay taxes on all of them, where applicable.

Not including dividend income🏦

Investing in equities and mutual funds have gained a lot of ground in recent years. If you have received any dividend from the FY 2020-21, it is mandatory for you to declare it in your return and pay tax on the dividend at your slab rate.

This used to be tax-free until FY 2019-20.

Missing out on clubbing of income

There may be instances when income from your spouse or minor child has to be clubbed with you. Cases like these arise if the money given to them is invested, the interest earned on that investment is liable to be clubbed with yours and taxed.

Failing to reconcile income and other details between your return and Form 26AS🔃

Form 26 AS is your annual tax credit statement which records your income, TDS, and many more details like foreign currency transactions, sale of immovable property, etc. All the figures in your Form 26 AS and your return are supposed to match. If they don’t, you may end up getting notice from the IT dept or get a lesser refund amount. You cannot show a lesser income on your IT return than the one shown on Form 26AS.

Claiming deductions under wrong sections

Most taxpayers use deductions under  Section 80. Make sure to claim deductions under the right section, especially when the same isn’t declared to your employer earlier.

Verifying your return after filing⌚

Don’t be under the impression that all is done just with filing your tax return. You should either e-verify by any one of the methods available – through your net banking account, Aadhaar OTP, Demat account, etc. You could also do it the physical way by posting a signed copy of the acknowledgment to the Central Processing Cell,  Bangalore.

Where can you file your Tax returns?

Many of you may have faced errors on the e-filing website of the IT dept while trying to file tax returns. Did you know you can now file your tax return right on your Finity app.? All it takes is 3 simple steps.

  • Upload your Form 16 or fill in the details manually
  • Review income tax computation
  • Confirm and file ITR

Your ITR will be filed immediately and you will receive an acknowledgment from the IT Dept.

No matter which method you choose, you have 120 days to verify, failing which your ITR will not be processed.


You Ask – We Answer

I am an employee at a private company and I am running a startup. I have income from both sources, can I file my tax returns in ITR 1? – Deepa Acharya

As you have business income, you cannot file tax returns in ITR 1. You could use either ITR 3 or ITR 4 (only if you are using the Presumptive taxation method for business income ) for filing your tax return.


Image Source : The Financial Express
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