Yahoo Finance Filing tax returns? Avoid these 7 common mistakes
The income tax return filing season is back. The last date for filing has been extended to Sept 30, 2021. During this time of the year, individuals are scrambling to get their Form-16s, TDS certificates, investment certificates, bank account statements in order to properly fill the form and pay balance taxes or claim refund, if any.
The Income Tax department has launched a new website which is facing glitches and there have been demands for further extension of the deadline. However, that’s not in our control.
In an earlier piece, we have seen how the extension date by two months is not applicable to all assesses, check here whether you need to fill form immediately or can wait till Sep. 30, 2021.
Correctly filing your income tax return is very important. Wrong filing can lead to notice from the IT department, delay in processing of refund, imposition of penalties and / or the requirement of filing a revised return.
Let’s take a look at the common mistakes people make while filing income tax returns.
1. Selection of correct form
There are various forms available from ITR-1 to ITR-7, which one should you choose. One should carefully look at the description of each form before deciding which one to use. For individuals there are 4 forms.
Source: www.incometaxindia.gov.in
If you are salaried but have capital gains (from shares / property etc.) you cannot use ITR-1, you have to use ITR-2. If you are a Director in a company getting a salary, you have to use ITR-3. If you are a self employed person and are using presumptive income sections then use ITR-4. If you have income in the form of profits from business / profession use ITR-3.
2. Quoting wrong Assessment Year
Assessment Year (AY) and Financial Year (FY) are two different concepts. The income earned in the financial year 2020-21 (1 April 2020 to 31 Mar. 2021) is assessed for tax in assessment year 2021-22.
If you are filing the return for FY 2020-21, then AY will be 2021-22. If you are filing the return for FY 2019-20, then AY will be 2020-21. (AY = FY + 1)
3. Reconciliation of income and tax credits with Form 26AS
Form 26AS is an annual consolidated statement which includes information on tax deducted on your income by various deductors during the year, like employer (on salary), banks (on interest), etc. You can view this statement while filing ITR on the new website.
Essentially, all incomes shown in this statement have to be taken into account while filing your ITR. If you miss any income (say like interest income), you could get a notice.
Gross income from a deductor (before TDS) has to be included and not net income (after TDS).
Salaried persons should ensure that their total income and tax deducted by the employer in the Form 16 matches with the Form 26AS, if not raise it with your HR/Finance department.
4. Failure to include certain income
Some of the incomes which are exempted from income tax are receipts from statutory provident fund, public provident fund, superannuation funds, scholarship received for completing education, annuity from insurance plans, etc.
Though they are exempt one should report these in the ITR as it could make it difficult for a taxpayer to explain the source of a particular income in future. No tax is levied on it anyways, so no harm in reporting.
5. Filing schedule of capital gains
The interest in stock markets have grown exponentially during the pandemic year with significant addition to demat accounts. If you are salaried and trade in equities then you have to use ITR-3 to report capital gains.
If you have sold property during the year, then also you could have reported capital gains and need to account for in the schedule. All demat accounts nowadays have a break up of capital gains made during the year and you can use this number to file returns.
6. Prevalidate bank accounts for refund
If you don’t have a prevalidated bank account you cannot receive refunds. Refunds are transferred electronically only to your bank account that is linked with your PAN, effective from 1 March 2019. Your bank account can be pre validated using a simple procedure at the e-filing portal at www.incometax.gov.in.
7. Failure to dispatch ITR V in time in case you don’t e-verify
After having successfully filed your ITR online, you need to verify it. The IT Department starts processing your return, once it is verified. Refunds, if any, are processed for returns that have been submitted and verified. You can e-verify either through netbanking or Aadhaar OTP.
In case you don’t everify you need to submit / courier ITR-V in physical form to the central processing centre in Bangalore. Sometimes people forget and their submission online is not valid.
To sum up, avoid these common mistakes and enjoy a stress free filing!
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