As per the requirement of the Income Tax Act, 1961, all the individuals who qualify the basic exemption limit applicable to them have to file their Income Tax Returns mandatorily. Nevertheless, they can file it voluntarily also as there are many benefits attached to the same. However, since the Income Tax law is as vast as an ocean, it is common for an ordinary taxpayer to commit certain errors while filing his Return of Income. Let's walk through the following article to understand some of the general mistakes made by individual taxpayers while filing their returns -
Selecting the Wrong ITR-Form
A basic mistake that taxpayers usually make while filing the ITR is choosing the wrong ITR form. Filing an Income Tax Return
using the wrong form is considered “defective” under the tax laws, and it can lead to the return not getting processed by the Income Tax department. That is why it is essential to have a thorough knowledge of the applicable income tax forms.
The choice of the ITR form is based on the type of income earned by the taxpayer or the category to which the taxpayer belongs.
Quoting the Incorrect Assessment Year
While filing the returns, it is essential to mention the relevant Assessment Year accurately. It is normal for taxpayers to confuse the Financial Year with the Assessment Year. It must be noted that Assessment Year is the year following the Financial Year. For example, for FY 2020-21, the correct corresponding AY is 2021-22. Quoting the wrong Assessment Year increases the possibilities of double taxation and attracts unnecessary penalties.
Furnishing Incorrect Bank Account details
Since the Income Tax department credits the Income Tax refund in the bank account directly, it is pertinent for a taxpayer to make sure that the details of the bank account selected for the Income Tax refund credit are accurate. In the situation of the taxpayer having provided the wrong information about his bank account chosen for refund, the credit will get blocked.
Providing Wrong Personal Information
Personal details such as name, mail id, contact number, address, date of birth, etc. must be correctly declared in the Income Tax Return by the assessee. He must be extra careful with his email ID and mobile number and make sure that these details provided to the department are updated ones because, in this era of digitization, the department communicates with the assessees and sends them notices and orders, if any, on their registered email ID and mobile number only.
Not Cross-checking TDS with Form 26AS
Another error usually made by a taxpayer is not verifying Form 26AS before filing his return of income. Form 26AS includes all the details related to a taxpayer's income, Tax Deducted at Source (TDS), advance tax paid, self-assessment tax, etc.
A salaried individual must cross verify the details with Form 16 issued by his employer with Form 26AS. If the TDS showing in Form 16 of an employee is not reflected in his Form 26AS, he will not get a credit for tax deductions that are not specified in Form 26AS. The taxpayer must ensure that the information in Form 26AS is accurate to claim appropriate credit of the tax deducted at source. Inconsistencies between a person's Form 26AS and Form 16 or TDS certificates may result in getting a lesser refund.
Not Revising the ITR after Spotting the Erroneous Return
After filing the Income Tax Return, if the taxpayer discovers any error, he must rectify his mistake and file the revised return. A return can be revised up to 31st December following the relevant Financial Year. The Income Tax Department can serve a notice under the relevant provisions of the Income Tax Act if any inconsistencies are detected in the ITR. Hence, it is imperative to revise the original return if any mistakes are spotted therein to comply with all the provisions of the Act and disclose all the information accurately.
Failure to E-verify the Return or Dispatch ITR V on Time
Once the Income Tax Return is filed successfully, it must either be e-verified via net banking, Aadhaar OTP, EVC on the Income Tax website or through DSC, or the ITR V must be verified physically by the assessee through self-attestation, and it should be sent to CPC via ordinary or speed post only. The time limit for ITR verification is 120 days from the date of e-filing of the return. It is necessary to verify the return because the IT department starts processing it only after it is verified.
Not Paying Self-Assessment Tax
Another common mistake committed by a taxpayer is filing the Income Tax Return without paying the computed self-assessment tax. The tax amount must be paid at the time of filing the ITR to avoid getting the filed return being declared as a defective return and getting any notice from the Income Tax department.
Not Filing Return if Tax has been Deducted at Source
Many assessees think that if the tax has already been deducted at source on their income, they are not supposed to file their return. However, this is not true. No matter if the tax has been deducted from his income or not, it is mandatory for every assessee to file an Income Tax Return if his annual income exceeds the basic exemption limit applicable to him. Also, the ITR must be filed to claim credit for TDS, if any.
Reporting Income Net of TDS
Many a time, the assessee enters the income on the receipt basis, i.e., net of tax deducted at source in the column of a particular income in the ITR. It must be remembered that the TDS amount has to be added to the net income received by the assessee, and the gross amount has to be disclosed in the ITR.
Non-reporting of Exempt Income
Many persons have a common misconception that the income exempt from tax such as PPF interest, maturity proceeds of insurance policies, agricultural income, etc. is not required to be disclosed in the Income Tax Return. In fact, since the income from all the sources of an individual is supposed to be disclosed in the ITR, such exempt income must also be reported and mentioned in a separate annexure of the ITR.
Not Reporting Income from the Previous Job
In cases where assessees switch jobs in a financial year, they often skip disclosing income from their previous job while filing the ITR. Having worked with more than one employer in a particular year, the assessee ends up having different Form 16s from each employer at the time of filing his return. In such cases, the taxpayers have to aggregate their income from all the employers during the relevant financial year and report such amount under the head 'Income from Salary' in the ITR.
Not Reporting Income from Investments
The assessees often forget to report the income derived from the sale of investments such as long-term capital gain on sale of shares, short-term capital gain on sale of property, gain/loss arisen on sale of stocks, etc. Whether the gain arising on the sale of such assets would be long-term or short-term would depend upon their period of holding in the hands of the assessee, and accordingly, their tax treatment will vary. However, in any case, the assessee must make it a point to disclose all the income earned from such investments in the ITR.
It is crucial to file the Income Tax Return correctly. Although there are a lot of aspects that need to be taken care of while filing the return of income, but it is not difficult to do so. All that is required is reading the instructions carefully and patiently filling in all the required details step by step.
Authored by CA Manish Gupta
& assisted by Kriti Agrawal
For any queries or suggestions, reach at email@example.com
-The information given above by the author is to provide a general guidance to the readers. This information should not be sought as a substitute for legal opinion.