10 important points while file Income Tax Returns.
Many taxpayers mess up their tax returns because of either out of greed, ignorance of rules, or just lack of time for knowing the rule. Some mistakes are not very serious offences and the taxpayer will get away with an additional tax demand. But some errors, such as not mentioning cash deposits after demonetization or foreign assets and income or sale of property disclosure, can land the taxpayer in serious trouble
How to avoid such mistakes? There have been several changes in tax filing rules in the past year. The tax payer may not be aware of all the changes so it is advisable to take help of professionals in filing the return and avoid any mistakes. There might be many mistake which a individual makes if filing is done by self. Here are the few common errors or mis outs in case of filing returns.
1. Returns Compulsory if Income Exceeds Basic Limit
Taxpayers hold many misconceptions that the income to be calculated for basic exemption limit is after deduction. However it is not true. The rules say an individual has to file his tax return if the gross taxable income is above the basic exemption limit of Rs 2.5 lakh for all taxpayers, (Rs 3 lakh for senior citizens above 60 and Rs 5 lakh for very senior citizens above 80). Further, the gross income is computed after taking into account exemptions such as house rent, conveyance and other allowances, but before the deductions like 80C, 80D etc
2. Cross Check and Verify details of TDS deducted with Form 26AS
We all need to verify whether the tax deducted on your behalf has been credited to your PAN. While the tax deducted by your employer and interest deduction will reflect in Form 16, check out your Form 26AS online to make sure that all other taxes (advance tax, TDS on interest and other incomes) have also been credited to your PAN. Form 26AS acts like a passbook for all the taxes you have deposited in to government treasury. The tax authorities consider this document as the sole proof of taxes paid by you. Once the return is filed, the tax department's system reconciles the details in the return with the amounts appearing in the taxpayer's Form 26AS. If the amount do not match usually a Demand Notice is send to the tax payer to pay the amount of tax due.
3. Choose the correct ITR From
One big confusion among taxpayers is which form they must use to file their return. Read the below article to know which ITR form to be used
Which ITR form you should File? New Income Tax Return form for AY 2017-18 FY 2016-17
4. Cash deposition after demonetization
If you deposited more than Rs 2.5 lakh in cash in your bank (all Bank Accounts consolidated) after demonetization, it has to be reported in the tax return. Income Tax Department has already got details of the cash deposited by individuals. This information can be matched with the ITR. In case there is a mismatch in the reporting, the individual can expect a notice and penalty for misreporting can range from 50% to 200% of the underreported income. And further you can be prosecuted for submitting a false statement.
5. Interest and other income to be included.
Eight out of 10 taxpayers think interest from tax-saving fixed deposits is tax free and Interest earned on saving bank account is tax free. Investors used to split their deposits across branches to avoid TDS. Now, TDS applies if the combined income from deposits in all branches of a bank exceeds the threshold. Further there are other income as well like one time gift of more than Rs 50,000/- the same is also taxable unless received from relative.
6. Income from Two Employer
some people think they can get away with a lower tax if they don't mention the income from the previous employer in their return. However this is a misconception. If some tax has been deducted on the income from the first employer, it will be reflected in Form 26AS. If the person doesn't report that income, the discrepancy will get picked up and he will get a tax notice.
so an individual has to take help of professional and calculated total amount of tax liable in case he is employed in two or more organization during a year.
7. Foreign Assets and Income
You have to give details of your foreign bank account's holding status, account opening date, interest accrued during the year and schedule and field number under which the same income is reported.
8. Assets and liability to be disclosed if Income more than 50 Lakhs
Taxpayers whose income is more than Rs 50 Lakhs are also required to mention details of the physical assets they owned. Now, the tax department wants them to also give details of their financial assets. They need to declare any land or building under immovable assets. Movable assets list includes cash in hand, vehicles (including yacht, boats and aircraft), jewellery, bullion and other valuable metals. Further incase of immovable property they also have to provide address and number of property
9. Compulsory Aadhaar Number to be mention in return
Individuals who have the Aadhaar must mention it in their tax returns. Only those who do not have an Aadhaar are exempt from the rule.
If you have the Aadhaar, it is also necessary to link it with the PAN if you are filing your tax return. This is very easy and takes five minutes.
10. File Before deadline and verify return
File the return before the 31 July deadline. Read article why you should file your return before deadline Benefits of filing income tax return before due date of 31 July