Nine errors you should avoid while filing tax returns
To help you avoid errors while filing tax returns, we pulled out nine common mistakes you could possibly make while filing returns offline or online. Bindisha Sarang reports.business Updated: Jul 04, 2012 21:05 IST
The attention we give while playing BrickBreaker on the BlackBerry is not the same that we devote to the screen while filing our tax returns. The error rate of BrickBreaker is likely to be much lower than the error rate while filing tax returns. To help you avoid these, we pulled out nine common mistakes you could possibly make while filing returns offline or online and how to avoid them.
We suggest you take the e-filing route through tax portals; these have a software that prompt you to correct common mistakes. However, here are nine things you need to be careful about.
Picking up the wrong form
While it is the first step to filing taxes, it is also the first thing you need to be careful about. There are five forms that you need to choose from, depending on your sources of income.
You need ITR 1 (Sahaj), if you have income from salary and pension; income from other sources, such as savings bank account and fixed deposit; and income from one house property.
ITR 2 is for individuals or Hindu Undivided Families (HUF) with income from all the heads applicable to ITR 1; house property (more than one); income from capital gains; income from other sources (including from lottery wins and betting on race horses); and who own foreign assets.
ITR 3 is for a HUF or individual, who fulfils the criteria for ITR 2 and also is a partner in a firm but does not carry on a proprietary business.
ITR4 is for individuals having income from business or profession (such as commission agents, anyone dealing in futures and options, doctors, CAs, lawyers and small shopkeepers).
Signing a blank form
Often you don’t have enough time to file returns yourself and hire an agent to do the work for you at an extra cost. In such case, ensure that you squeeze enough time to go through the form once the agent has filled it; signing a blank form and leaving it completely on your agent may not be the best strategy. Even a typing error could spell trouble for you.
You miss filling in one number or character of your permanent account number (PAN) and the form cannot be processed. Besides, you could be fined R10,000 for an incorrect entry.
Another number to fill in with care is the tax deduction account number or TAN of your employer. You will find this number in your Form 16. If you are expecting a refund, you need to mention your bank’s savings account number and the nine-digit MICR number.
Filling in old details
Job changes and transfers are common these days. The office email ID also keeps changing with every job change and in some cases even location change. But the ITR form needs both physical address and email address.
In fact, email is a preferred route for communication for the income-tax department. “Many individuals make the mistake of providing email IDs which are either not in use or get discontinued due to inactivity or change of jobs,” said Ankur Sharma, CEO, Taxspanner.com, a tax filing portal. “One should make sure that a valid and functional email ID, which you regularly access, is provided in the form.”
For your physical address, it is always safer to give a permanent address instead of your rented accommodation. If you are expecting a refund, and you move from your current location, you may not be able to get hold of the refund cheque that easily.
Not looking at multiple Form 16s
If you’ve changed jobs in the middle of a fiscal year, ensure that you collect Form 16s from both employers. If you have not shown your savings with the previous employer to the present employer, there is a chance of paying extra tax, especially if you are in the high income bracket.
Ignoring income from other sources
Even though long-term capital gains and dividends from equity mutual funds and listed securities are not taxable, they form part of your income from other sources and you need to give details about these in the income-tax form. Other heads for income from other sources could be from property transaction, gains on investments or rent received from a house you own.
Not attaching TDS certificate for interest income
Since all banks deduct tax at source for interest accrued in your savings or fixed deposit accounts, it doesn't mean you don't assess your tax liability and mention it in your form. Get Form 16A from your bank. The portal will take into account Form 16A details you've added and compute the data.
Reversal of deduction
If you sell your house within five years of getting its possession, the deductions availed on the home loan are reversed. “Any installment or part payment of amount due under self-financing schemes is allowed as deduction under section 80C. However, if you sell the house within five years of getting possession, all the deductions claimed on this house would be deemed to be income in this year and you need to pay tax on it,” said Sharma.
Sending e-filing acknowledgement
E-filing is becoming popular with each passing year. In fact, this year it is mandatory for those earning above Rs 10 lakh to e-file their returns. Moreover, many agents too e-file returns of their clients.
However, one thing you need to keep in mind is the acknowledgement ITR-V. Though you get 120 days to send ITR V, many make the mistake of sending it via a courier in the last-minute hurry. However, the income-tax department only accepts ITR V acknowledgements sent by normal post or speed post.