Due to multi-fold changes introduced by the income tax department every year relating to income tax return (ITR) forms and additional reporting and disclosure requirements, it is imperative for taxpayers to be careful to ensure they don’t make any mistakes.
Making a mistake can have consequences such as the taxpayer having to file revised returns or facing an inordinate delay in getting refunds, etc. To avoid all that and more, it’s best to be at your guard right from the beginning.
Here are five of the common mistakes that taxpayers make while filing ITR.
Selecting The Incorrect ITR Form
It is of utmost importance to select the appropriate ITR form for filing returns and the same is based on the nature of income or the category to which the taxpayer belongs. The selection of incorrect ITR forms can attract defective notice from the income tax department.
Furnishing Incorrect Personal Information
It is important to disclose your personal details like contact number, address, date of birth and others, accurately. Further, the bank account details should be correct to ensure smooth processing of the tax refund, if any.
Not Disclosing All Sources Of Income
An individual may have various streams of income that may be taxable or exempt depending upon their nature. A mistake that taxpayers usually make is only reporting their primary source of income.
“Taxpayers must disclose income from all the sources like rent, capital gains or losses, interest from the savings account, dividends, etc and also exempt income like interest received by non-residents from NRE (non-resident external) accounts, interest on Public Provident Fund, agricultural income, the share of profit from partnership firm/LLP, etc.,” says Akhil Chandana, partner, CFO Services, Grant Thornton Bharat, a consulting firm.
Ignoring Foreign Assets/Income
Individuals who qualify as ordinary residents are liable to tax in India on global income and are required to report foreign income and assets in the Indian tax return.
“However, many resident individuals skip reporting such income due to the incorrect understanding that they have paid taxes in another country and there is no further reporting or tax obligation in India. Non-disclosure or incorrect disclosure of foreign income/assets can lead to levy of penalties,” adds Chandana.
Not Checking For Typos: This reads like a no-brainer but can nevertheless make a huge difference. One missed or incorrect digit will land your money in someone else’s account or make you a defaulter. A mistake could disrupt your tax filing and cost you a fortune. You must always check out for the brackets or hyphen, ampersand sign etc, you are putting.
Last but not the least, you must keep a copy of your signed ITR form along with the proof of your filing. A note of acknowledgement that your e-file has been accepted by the income tax department will protect you from any claim that you filed late or not. Also, you could keep this as a receipt that would come in handy when you have to file our return the next year.