Filing your Income Tax Returns? Things to keep in mind

The last date to file income tax returns popularly called filing ITR is July 31, 2019. Filing income tax returns may be difficult if there are too many investments. A number of documents are involved and chances of mistakes are high. You could end up with a tax notice or a hefty fine as the income tax department imposes strict rules to curb tax evasion. Keep these things in mind while filing your income tax this tax season.

1. Report all income sources

Report your income from all sources while filing income taxes. Disclose income sources apart from your salary like interest income from savings accounts or fixed deposits. Report all your income sources including those which are absolutely tax-free. The tax department could send you a show cause notice for not reporting these incomes.

2. Choose the correct ITR Form

There are several ITR Forms with different disclosure requirements. You have to select the right form depending on the type of income, quantum of income and your residential status. Don’t file income tax returns using ITR 1 just because it’s easy to fill. Choose the right form while furnishing income tax return or it would be treated as defective.

3. Reconcile income with Form 26AS

If you are subject to TDS, the income tax department generates an annual tax credit statement called the Form 26AS.  The Form 26AS displays different income and taxes deducted on it. Download this statement from the income tax e-filing website. You have to reconcile and disclose income in your tax returns, in sync with income reflecting in Form 26AS.  The income from salary must match that reported by the employer in Form 16, Part A and Part B. Differences could mean an income tax notice, with the tax department demanding a clarification.

4. Don’t falsify income source

Fake tax professionals advise deflating income or falsifying income sources. This is easy as no documents have to be submitted to support deductions or exemptions while filing taxes online.

You can claim exemption for house rent allowance, deduction on home loan, education loan, medical insurance or even disability without supporting documents.

Fraudulent claims of tax deductions and exemptions have severe consequences. If you knowingly claim tax deductions and exemptions without evidence, and the tax department picks your income tax returns for scrutiny, its tax evasion. The computer-aided scrutiny system CASS picks the case as an under-reporting. Misreporting of income attracts a penalty of 200% under Section 270A, on the tax you try to evade.

Fake tax professionals falsify information in the tax returns, understating taxable income. The tax department catches the taxpayer and sends an income tax notice.

5. Clubbing of income from previous employer

If you have switched jobs in the financial year, don’t forget to report the salary income earned from the previous employer. Switching jobs in a financial year mean two or more Form 16s. The Form 16 contains the total salary paid by the employer and the taxes deducted in the year. To avoid mistakes, recalculate the total tax based on Form 16.

Make sure tax deductions and exemptions have been claimed only once. Maintain the requisite proof in case of an enquiry by the tax department. If you have declared the same investments with the current and previous employer, share old salary details with the new employer. If there’s a change in salary structure, keep a check on the tax slabs.

6. Failing to file tax returns on time

Missing the ITR filing deadline has legal implications. The maximum penalty can go up to Rs 10,000. In the previous year, filing ITR after the due date of August 31, 2018, but before 31, December 2018 meant a penalty of Rs 5,000. This penalty was increased to Rs 10,000 on filing ITR after 31, December 2018. A maximum penalty of Rs 1,000 is levied for small taxpayers if total income does not exceed Rs 5 Lakh.

7. Picking the wrong year to file taxes

Many citizens get confused on the year of filing income tax returns. Be clear on this before filing ITR. Consider the financial year of your income as the previous year. The following year in which your income is assessed and return must be filed is called the assessment year. In the present context, the assessment year is 2019-20 and the previous year is 2018-19.

8. Not verifying returns

Uploading ITR does not complete the return filing process. The income tax department processes your tax returns only after verification. Tax refunds if any are processed after submission and verification.

Returns can be verified electronically through net banking, Aadhaar OTP or EVC on the Income Tax Department website. You don’t have to send the physical ITR-V if the ITR is successfully verified through net banking.

Stay alert this tax season and file tax returns in time. Tax planning is easy with the services of a financial advisor.

Be Wise, Get Rich.

The author is CEO and Founder of IndianMoney.com