Filing Tax Returns? Avoid these three errors at all costs

However, these initiatives taken with the right intentions are full of technical and other glitches. For example, there is no clarity on whether a taxpayer Can rectify the errors in the pre-filled fields manually and whether penalty for late filing will be waived if there is delay in filing the return before the due date for the reporting authority to rectify such error.

Sandeep Jhunjhunwala, Partner, Nangia Andersen LLP said, “We are transitioning to a highly automated filing system, but taxpayers should be careful while filing ITR as it rests on the individual to furnish correct information and verify the income return.

Any lapse in ITR filing can put you on the radar of the taxman. We tell you three major mistakes that you should avoid for a hassle-free ITR filing experience.

Getting income wrong: Over the years, several changes have been made to make the ITR form complete. While auto populated ITR forms can be helpful for taxpayers and expedite the filing process, they also increase the chances of errors in filing.

Jhunjhunwala said, “Due to multiple data entry points and backend linking of such data, there may be errors like under or over reporting, or even missed reporting of income or incorrect TDS details in pre-filled forms. Huh.”

“The information provided in such forms should be separately verified before submission of return. In case of any error, the taxpayer may need to communicate with the entity furnishing the information. This can lead to undue hardship, delay in reporting and accidental errors in filing tax returns.”

Many mistakes in filing can lead you to notice for defective return or even demand notice.

Mismatch between Income and Expenditure: In addition to the income declared in your ITR, the tax department collects information about your earnings, especially high value transactions ₹10 lakh or more from other sources also. The tax department has mandated credit card companies, banks, registrars and mutual fund houses to submit annual information reports on high value transactions.

“Under section 285BA of the Income-tax Act, a person or authority responsible for maintaining records of specified financial transactions, including transactions on property, banking, shares and securities and provision of service or works contract, is required to submit Statement of Financial Transactions to CBDT from time to time. Sujit Bangar, Founder, TaxBuddy.com said that these statements are where the government gets information about high value transactions.

Additionally, Form 26AS was amended last year to include certain specified financial transactions (SFTs) apart from TDS and tax payment details.

“These (SFT) are cash deposits of more than ₹10 lakh in savings account, sale and purchase of assets ₹30 lakhs or more, purchase and sale of shares, units and debentures etc. The details of outstanding tax demand if any or any preparatory proceedings will also be reflected,” Bangar said.

Any discrepancy between the income reported by you in your ITR and your data with the taxman could bring you under scrutiny. One way to avoid this is to download Form 26AS in advance and cross-check all the entries in it with your bank and other relevant details before filing tax.

“If you find any discrepancy, it can be brought to the notice of the tax department. Mistakes can happen due to duplication of entries in bank accounts or other statements. These can be rectified by contacting the reporting authority, but ensure that you complete this due diligence well before the ITR filing deadline to avoid last minute hassles. “Check documents carefully like Form 16, Form 26AS, statement of broker, demat account and bank statement should be sufficient to ensure correct filing of ITR.”

If you are a salaried person who spends more than ₹10 lakh annually from your credit card on work related expenses, and subsequently reimbursed by the company, it is advised that you document such transactions as proof in case of enquiry. “Any mismatch with the data available with the tax authorities could mean verification or verification of the ITR filed,” warned Jhunjhunwala.

Incorrect ITR Form Filling: To file ITR for FY 2011, the taxpayer has to choose from seven tax forms. The correct form to be filled is to be determined based on the total amount earned in the financial year and all sources of income, which includes both taxable and tax-exempt income.

For example, for a person earning income from salary or pension, a house property, and sources including interest from deposits, gifts and dividends, an amount of less than ₹50 lakh, ITR-1 is applicable. Now, suppose a salaried person with no other income has made a Long Term Capital Gain (LTCG) of ₹40,000 in the financial year. The person may believe that due to having LTCG below ₹1 lakh is tax-free, he can opt for ITR-1 as there is no other income to report other than salary. However, it can put the person in trouble.

“LTCG from stock and equity funds is to be reported in ITR-2 irrespective of the amount of profit. The ITR form requires disclosure of both taxable and tax-exempt income, so the taxpayer should choose the ITR form based on the nature of the income and not just the amount. ITR-1 is only for those who have no income other than salary or pension, a house property and rent from other sources,” Bangar said.

Similarly, if your equity investments are not limited to stocks and funds and include futures and options, you will have to choose between the more complex ITR-3 and ITR-4, as gains or losses from the derivatives market can be traded commercially. income is considered. and not capital gains.

Filing the return using the wrong form can lead you to get a notice for defective return under section 139(9) from the tax officer. “Filing of wrong ITR form may render such return invalid. Invalid return would mean that ITR has not been filed for a particular assessment year,” Jhunjhunwala said.