Every year, 31st July is the last date to file your Income Tax Return for previous Financial Year. It is equally important as your birthday or anniversary date. I remember 10 year ago it was next to impossible to file Income Tax return without any help but Income Tax Department has done a commendable job to simplify the Income Tax Return Process. E-filing of income tax return through official portal of Income Tax Department is very easy, convenient & most important it’s FREE. To avoid last minute rush, i always file my income tax return in the month of May or June. I keep receiving queries from my readers on Income tax return. For the benefit of my readers, i will highlight some of the common mistakes committed by the tax payer while filing income tax return. Hope this post will help you while filing your Income Tax Return error free.
This is most common mistake while filing Income Tax Return. ITR 1 (Sahej) is default choice for filing Income Tax Return. Any wrong selection of ITR may result in rejection of Income Tax Return. To select right ITR form, Click Here for description of each ITR form. To share example, One of my reader had income only from Salary and last year he filed ITR 1 which got rejected. Reason for rejection was that his exempt income exceeded Rs 5000. As per CBDT, it is mandatory to use ITR 2 instead of ITR 1 if exempt income exceed Rs 5000. On close scrutiny, i observed that he received Rs 75000 as money back from Insurance policy which was exempted but not declared in Income Tax Return. The definition of exempt income is not clearly defined whether it include allowances received by employee e.g. HRA, LTA, Medical etc or not. Another school of thought is that exempt income only include Tax Free income from PPF, Dividends, Agricultural Income, Insurance Policy, EPF withdrawal etc. Whatever be the interpretation, It is important to select right ITR form to avoid rejection of Income Tax Return.
Mandatory E-filing for Income more than Rs 5 Lakh
Tay Payer earning more than 5 lakh during FY should e-file Income Tax Return. In such cases, Physical return will be rejected by the Income Tax Department. E-filing is very convenient and processing is also fast.
Reconciliation of TDS
One of the most common mistake while filing Income Tax Return. Tax Payer file Income Tax Return without TDS reconciliation. TDS details are available in form 26AS. To check tax credit statement or form 26AS, follow these simple steps
2. Register and Log in
3. Click on “View Form 26AS (Tax Credit)” on LHS Bar.
4. You will will be redirected to the TDS-CPC website to view form 26AS (Tax Credit Statement). This site is also known as TRACES (TDS Reconciliation Analysis and Correction Enabling System)
Reconciliation with Form 26AS is very critical as TDS details are lifeline of your income tax return. Any mismatch in the details provided in Income Tax Return and Form 26AS may invite notice from income tax department or refund can be rejected. Most common example is TDS on Bank FD’s. Banks deduct TDS @ 10% but if the Tax Payer is in higher income tax bracket i.e. 20% or 30% then balance tax should be deposited as self assessment tax. Most of the tax payer don’t pay balance tax on income from Bank FD’s. In such a scenario, Be ready for notice from Income Tax Department.
No Tax Dues, No Income Tax Return
This misconception is mostly among salaried class. Tax Payer think that as his or her employer has deducted TDS therefore all taxes are paid on time and there is no income tax due from his or her end. He need not to file Income Tax Return as the tax is already paid through TDS on salary. Please note, Income Tax Return should be filed even if all the taxes are paid on time through TDS.
Confusion between Assessment Year and Financial Year
One of my reader Gunjan Raheja wrote to me that Income Tax Department has rejected her Income Tax Return. When i closely scrutinized her return, i observed that she entered wrong Assessment Year while filing Income Tax Return. Many tax payers get confused between Assessment Year and Financial Year. Basis thumb rule is that Financial Year is the year in which income is earned for which you are filing the Income Tax Return is filed and Assessment Year is the year in which you are filing the return. This year, a tax payer is filing Income Tax Return for Financial Year (FY) 2013-14 & Assessment Year (AY) is 2014-15.
Signed ITR V Acknowledgement
If you are e-filing Income Tax Return without digital signature then it is mandatory to take a print out of ITR V Acknowledgement, sign it and send it to CPC – Bangalore. ITR V should reach CPC Bangalore within 120 days of e-filing the return. Don’t send ITR V through courier, it will not be accepted. You can send ITR V acknowledgement only through Ordinary Post or Speed Post. It is advisable to send through Speed Post so that you can keep track.
Bank Details in ITR
It is mandatory to provide correct Bank Details in ITR specially if you are expecting Refund. Even if there is No Refund still provide correct information on bank account. You never know, you might have paid excess tax and IT department will issue refund. You should provide only your bank details in ITR. In one of the instance, one of my reader provided his bank account details in his wife’s Income Tax Return. Now his wife is struggling to get the refund.
I have tried to cover all the common mistakes in Income Tax Return which can be easily avoided. You may post your queries related Income Tax Return in following comments section. You can share this post with your friends and family members through following social media icons.
Last but not the least, Don’t forget to file your Income Tax Return before 31st July !!! As a responsible citizen we should pay our taxes & file Income Tax Return on time.
Copyright © Nitin Bhatia. All Rights Reserved.