With the concept of e-filing, more and more taxpayers are finding it easy in filing their income tax returns instead of visiting the local tax office.
Even with this simplified process, a lot of taxpayers do mistakes while filing their annual tax returns.
In this article, we have listed the most common mistakes taxpayers make while filing income tax returns.
Mistake 1: Not checking form 26AS and AIS before filing the income tax return
Form 26AS is a statement containing details of all the taxes credited to your account by various deductors.
The Income Tax department has provided the facility to view Form 26AS online. By selecting the form for a particular financial year, you can see all the taxes credited to you PAN.
Before filing Income Tax Return, it’s your duty to cross-check Form 26AS online with the actual amount to be credited as per your list.
Your deductor will issue form 16 and 16A to you for the tax deducted. Form 16 is a consolidated TDS certificate issued by the employer to employees stating the whole tax amount that has been deducted for a financial year.
Similarly, for other incomes like interest from bank deposit, you will receive form 16A showing the tax amount that has been deducted from your interest income. If you are a self-employed person, then for tax deductions, you will receive form 16A every quarter from the deductor.
Before starting the process of e-filing, you need to have all these certificates in hand. To confirm the genuineness of these certificates, you need to start comparing these certificates with form 26AS online. You need to reconcile it with tax paid, deducted during the year.
In case of any unexpected credit to form 26AS, we suggest you take up this matter with the deductor for rectification. Never take unexpected credit to your tax return as it may get reversed by the deductor and you end up receiving a demand notice.
Many times we have seen taxpayers are making mistakes by not comparing 26AS with the actual tax deducted. Due to this reason, they end up paying more compare to their tax liability or forget to claim refund.
Form 26AS will be used by the Income Tax department for issuing notices and refunds. Therefore, if you find any mismatch, then take up this matter immediately and get the mistake rectified before filing your income tax return.
Also Read: Form 26AS-All you want to know
Mistake 2: Choosing wrong Income Tax Retrun (ITR) forms
The government has notified various ITR forms to file income tax return. You need to choose the right Income tax form (ITR) forms based on your type of income during the financial year.
If you make mistake in choosing the right income tax return form, then your ITR will be treated as defective. If defects pointed out in income tax return not rectified, then it gets rejected.
To know more about Iincome tax return (ITR) forms we suggest you read our article How to choose the right ITR form for tax filing.
Mistake 3: Miscalculating tax liability
Taxpayers make many mistakes while calculating their income tax liability. As the tax department has all of your financial information, we suggest you take the following calculation mistakes into consideration while calculating your income tax liability;
- saving bank interest and other incomes such as interest on deposits and tax refund
- Ignoring the previous employer’s salary while calculating tax liability
- Not taking tax deductions and rebate into consideration
- Not disclosing house property income
Interest on saving account and previous job’s salary has been discussed later in this article.
At the end of the year, you are required to consider all of your income to calculate tax liability on your own and pay balance net liability if any to the tax department. Similarly, if you are required to get a refund then you can claim it by filing a tax return with the I-T department.
Mistake 4: Avoiding E-verification or Not sending ITR-V
Generally, taxpayers think that uploading tax returns is the last step of filling.
Due to this mistake, their tax return gets rejected by the department even though it has been filled correctly with all details.
After filing, acknowledgment copy gets generated. If you have filed your Income Tax Return without using a digital signature certificate or e-verification process, then you are required to send signed ITR-V form to the IT department’s CPC Bangalore office within 120 days of filing.
If you missed it, then look for your status online in the income tax portal. If your IT return is not yet rejected then try sending ITR-V again to CPC, Bangalore office.
Please remember, you have to send ITR-V to the below address in the ordinary or speed post. If you send by courier or through some other mode, then that will not be accepted. Even submitting ITR-V nearest to your IT office is not acceptable.
Address to Send ITRV:- Income-tax Department – CPC, Post Box No: 1; Electronic City Post Office, Bangalore, Karnataka – 560100
Instead of sending ITR-V, we suggest using the e-verification process for speedy processing of Income Tax Return.
You can e-verify your tax return by using Aadhar OTP or net-banking account or demart account or by validating bank account details.
Whatever way you choose, we suggest you not to forget to do verification as it will not process your return further.
We suggest your to follow the e-verification process as its easy and you need not send a printed signed copy to the I-T department’s Bangalore office.
In case you forget to do verification, the Income Tax department will send you reminder messages to your registered email ID and mobile number. You need to make sure that your registered email ID and mobile number has been mentioned in the tax return.
Mistake 5: Waiting till the last date of filing the income tax return
The most common mistake many taxpayers do for filing their income tax return is to wait till the last date of filling.
For individuals who are not eligible for tax-audit are required to file their income tax return one or before 31st July of the relevant assessment year following the current financial year.
Also Read:
- Income Tax Return filing due dates – For Individuals
- Consequences of Late or Non Filing of the Income Tax Return
We suggest you not to wait for the last date to file your Income Tax return. To avoid last-minute rush it’s always better to file your Income Tax Return as early as possible.
Mistake 6 :Not declaring dividend income in tax return
With effect from the financial year 2020-21 (assessment year 2021-22), mutual fund and stock investors are required to declare their dividend income in their tax return.
Dividend distribution tax has been abolished in Budget 2020.
Before preparing your IT return, you need to get details of such income for the whole financial year. You need to include it in your tax return under the heading “income from other sources” in order to calculate your tax liability correctly before filing.
Mistake 7: Did not report previous job’s salary
Every employee is required to report his or her previous job salary to the present employer in order to calculate tax to be deducted from the monthly salary.
However, it’s not mandatory to report to the present employer. If an employee wants then they can report.
If you have reported to the present employer, then it’s fine, your tax deducted will include the total salary income for the whole year. In case you failed to do so, then you need to disclose it while filing your income tax return with the I-T department.
Before filing you need to calculate your tax liability and interest for the unpaid taxes. If you prefer not to disclose the salary of your previous employer in your income tax return, then you may receive notice from the income tax department.
Mistake 8: Not reporting saving account interest in your tax return
While filing income tax returns, many individuals do not pay attention to saving account interest income. They concentrate on Form 16 issued by the employer. Form 16 will not have your interest income from the savings account.
However, it’s the income which should be reported under the head “Income from other sources” in your IT return and tax should be paid accordingly.
If you fail to browse your bank statements to collect interest income for the financial year and later on the I-T department found it, then you may end up getting a notice from the income tax department asking you to pay tax with interest and penalty.
Same concept is applicable to interest on fixed deposits.
Mistake 9: Claiming HRA exemption and section 80GG tax deduction
A taxpayer in order to reduce tax liability, may prefer to claim both HRA exemption and section 80GG tax deduction.
Please note, you can take advantage of either one. If you are getting house rent allowance for the financial year, then you can not claim tax deduction under section 80GG of the Income tax act, 1961.
If you claim both, your tax return might get filed, but, later on, you might get a tax notice from the I-T department asking you to pay more taxes along with interest and penalty.
Mistake 10: Providing incorrect details
Details like email ID, mobile number, bank account, postal address are very vital while filing the income tax returns.
If you are like others and making mistakes by not giving these details, then please avoid such a thing this time on-wards and correct your details with the department by changing your profile.
Here are some facts why these details are important to you;
Postal address
The postal address is used for sending refund cheque (in case not transferred to the bank account) and other communication related to the income tax return.
The postal address gets printed in your acknowledgment copy, so providing a copy at the time of loan processing may create a problem.
Email ID and Mobile Number
Department will send ITR-V received status messages, rectification requests, and notices to your Email ID. Email ID is also required to break your log-in password.
Like email ID you also get information on your mobile number. A mobile number is also required to break your login password.
Bank Account details
The refund comes directly to your bank account. Providing incorrect details will delay the process. While breaking the password, you are also required to provide your bank account details.
Also Read: How and when to revise Income Tax Return in India
