There is a whole world of deductions and exemptions available under tax laws.
Managing taxes can be a tedious task for many. Filing an income tax return — which details the income earned by an assessee in a given period, say a financial year — is both mandatory and important for a working individual. A duly filed income tax return — also known as ITR — enables the tax authorities to assess how much you have already paid in the form of advance tax (through tax deducted or collected at source) and how much is owed to you as balance.
Simply put, an income tax return enables a potential taxpayer to make a self-assessment of income earned and communicate it to the department. This communication happens through filing of income tax return. Filing income tax returns is mandatory under tax laws, and failing to do so or doing it inappropriately can attract penalty.
Here are seven mistakes that income tax assessees often make when it comes to tax-planning:
1. Missing The Due Date
Wealth planners emphasize the importance of meeting income tax deadlines. Needless to say, failing to report your income through an ITR in due time may lead to penalty. This penalty can go up to Rs 10,000.
(Also Read: Important Due Dates To Keep In Mind For Filing Your Income Tax Return)
2. Not Filing Income Tax Return
Not filing a tax return at all — or not filing them within the stipulated time — increased your chances of attracting a notice from the Income Tax Department. An individual earning more than the basic exemption limit must file an income tax return.
Individuals earning more than Rs 2.5 lakh in a financial year, senior citizens earning more than Rs 3 lakh and super senior citizens earning more than Rs 5 lakh must file income tax returns. There are other conditions too that make it necessary for an assessee to file an income tax return.
3. Waiting Until Last Minute
Procrastination is a common problem among taxpayers, which often leaves scope for many other issues. Naturally, you are prone to making an error if you do something in a rush. Why delay?
4. Using The Wrong Form
A common mistake that taxpayers often make — especially those waiting until the eleventh hour to ready their details to complete their income tax filing process — is using an incorrect form. Filing an income tax return using an incorrect form is deemed “defective” under tax laws. This is why it is important to have a sound understanding of applicable income tax forms.
Although the Income Tax Department has over the past few years simplified the income tax filing process to a great extent, one can take the help of a professional accountant to manage an income tax return.
(Also Read: Finding The Right Form For Your Income Tax Return)
5. Filling The Form Incorrectly
Last minute rush also leaves a big window for filling incorrect details. For instance, ITR-1 asks the assessee to provide details such as salary income, income from property and interest income. One must file the ITR well before the last date to be able to furnish all details correctly.
6. Selecting Wrong Assessment Year
Many taxpayers confuse Assessment Year with Financial Year. Always remember: Assessment year always follows financial year, in the sense that income generated in, let’s say, financial year 2018-19 can be understood as income generated in assessment year 2019-20.
7. Failing To Mention All Sources Of Income
Being transparent about income earned from all sources is both mandated by law and paramount. Not only failing to do so leads to discrepancies in one’s tax records, it also increases the possibility of you receiving a tax notice from the Income Tax Department and can even be read as tax evasion.
Ensuring clearly disclosing any income from multiple sources, including any income arising in the form of interest on investments and bonds, rent from property, and income in the form of dividends and gains from life insurance policies is a must. Any non-disclosure is a serious offence.
8. Claiming Deductions Inappropriately
There is a whole world of deductions and exemptions available under tax laws. Even if you manage your tax outgo yourself, taking the advice of a professional chartered accountant from time to time to learn about any changes in tax laws is a good idea to keep yourself thoroughly updated on the subject. There may be any new rules applicable in your case that you may be unaware of.
9. Not Paying Attention To Form 26AS and TDS Certificate
What the much-talked about form 26AS contains is basically information about any taxes credited to your Permanent Account Number (PAN). One can say it is in all means an income tax assessees tax passbook, detailing any tax refunds and tax demands related to your PAN.
Form 26AS form can be accessed from the Income Tax Department’s e-filing portal.
10. Not Caring To File A Revised ITR
Should there by any mismatch in the provided by you to in your income tax return already submitted to the Income Tax Department with your tax records, the Income Tax Department can issue a notice to you seeking answers. Such discrepancies can happen for a number of reasons, such as filing of wrong information due to human error or forgetting an important detail altogether. In order to avoid getting a notice from the I-T department, do cross check your entries.
Income tax laws allow assessees to rectify such mistakes by filing a revised income tax return.