Income tax returns (ITR) is the form or forms explaining the details of income earned throughout the year of an individual or business with the Income Tax (IT) Department. According to the law, income tax returns need to be filed every year for an individual or business irrespective of whether they earn it through regular income, dividends, interest, capital gains, etc. The Income Tax department also has a specific date for filing returns, before which both individuals, as well as businesses, need to file their ITR. The IT department has a standard predefined worksheet based on which the tax liability of each assessee is calculated.
Most people see income tax filing as a burdensome obligation and often end up neglecting it. However, it is actually a moral and social duty of every responsible citizen. Although it is usually voluntary in nature, it could be mandatory in a few cases. It could prove very useful to file IT returns especially when one wishes to claim past losses or when the returns are being revised.
With the improved technology and digitalisation of every government department, ITR filing could also be done online. The process is quite simple. One can download the ITR preparation software for the relevant year from the official website and follow the instructions given by the software. Once the tax return is calculated, the assessee can pay the tax amount and save the document in XML format. Then by simply logging in to the official website, the saved XML file and the Digital Signature Certificate (if applicable) can be submitted online. With just a few steps, the IT returns could be filed online, easily.
However, there are certain common mistakes that need to be avoided while filing income tax returns, namely:
- Never furnish incorrect personal details: While filing for ITR, it requires all personal details such as PAN, E-Mail ID, contact number, bank account number, IFSC, etc. There are high chances when one might accidentally provide incorrect details. In case even one of the above details are inappropriate, the IT department can reject the e-filing because there could be a mismatch of data.as for the contact details, if they are wrong, any form of communication regarding e-filing (e.g. One Time Password or OTP) will be done through the registered contact number and E-Mail ID. It may lead to missing out on important notifications.
- Always include all sources of income: Under the Income Tax Act, all incomes are categorised into five different heads, i.e. income from house property, income from capital gains, income from salary, income from business or profession and income from other sources. Individuals need to be careful to list all sources of income. Some may think that income from interests need not be mentioned as the tax for such income has already been deducted by the bank, however, it needs to be disclosed in the return even if the TDS has been deducted previously. Similarly, people owning more than one property must pay a certain amount as a tax even if the property is unoccupied or does not generate any useful revenue as such. It is a misconception that tax needs to be paid only for the house that is being occupied by the taxpayer.
- Only claim deduction under the appropriate section: Make sure that the claims made are in accordance with the law as deductions are very crucial for reducing tax liability. As per section 80 of the I-T Act, deductions can be made for contribution for PPF account, expenditure on a disabled person, contributing to a charitable trust, etc. The claims made must only be for deductions that the taxpayer is eligible for. Moreover, the claims need to be made while filing the returns or else the IT department may reject any later requests/claims.
- Ensure that the correct ITR form is filed: One of the most common and repeated mistakes is filing the wrong type of ITR forms. Each form type is specifically denoting each type of business or income source (e.g. Form ITR1- Sahaj for income from salary). Irrespective of whether it is an online or an offline form, mistakes are prone to happen and it is the taxpayer’s duty to check and recheck the forms before submission in order to avoid any errors.
- Report even the income that is exempt: Income could be in the form of dividends, long-term gains, etc. and most of them are exempt from taxes. So, even when such incomes do not require taxes to be paid, they need to be reported. It is always important to report such exempted income as well. Non-reporting or under-reporting income is considered as an ITR offence too.
Although ITR filing could be seen as a dreary process, it is mandatory to follow the rules and avoid committing the above-mentioned mistakes.
Also read: Benefits of filing Income Tax Returns (ITR)
To explore business opportunities, link with us by clicking on the 'Connect' button on our eBiz Card.
Image source: shutterstock.com
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.
Greetings! We would love to work with you and your company. We look forward to connecting with business houses and MSME's.