Ever since Income tax was introduced in India by Sir James Wilson in 1860 they have been dreaded. First British were required to pay taxes now it is Indians. Nobody likes to part with their hard earned money. But it is necessary for the smooth functioning of society.We must pay income tax as responsible citizens as we enjoy certain amenities.
Electronic filing or E-filing income taxes is mandatory for individuals whose income exceeds the threshold of INR 5 lacs. Fortunately or unfortunately I fall in that list and need to file my income tax online.
It was for the year 2011, I remember having filed wrong income taxes. I had a part-time consultancy business and also shifted to a new company. I had income from both income streams and did some serious online income tax efiling mistakes.
I could not prepare books of accounts for my business as I was busy in my day job. Also I unknowingly claimed exemptions twice as I had two Form 16s. I then had to hire a professional CA to get them all rectified. You can make some serious mistakes. Hence I’m sharing common income tax efiling mistakes of which I’m aware. You can avoid them in your income tax returns.
It is very important to be truthful, careful and fill all columns properly with zero errors as any error will lead to the form being deemed invalid or defective.
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Online income tax efiling mistakes
(Disclaimer: Dear, I’m not a professional CA. But I do know something about finance/taxes and have made compiled below list from personal experiences. 🙂 .hope the list is useful.
If you are e-filing your income taxes for the first time then you must undertake certain precautions so that the form is not declared invalid. People make these common mistakes at the time e-filing the tax returns and most of these errors are related to data/behavioral aspects.
Mistake # 1) Missing to report Details of exempt income
One must remember that dividend income from the Indian companies and long term capital gain on various securities are all exempted from income tax. There is a popular misconception that these incomes need not be disclosed in the returns.
However, the investment company or the brokerage house will always send these details to the IT department. So to avoid future complications, one must highlight these incomes at the time of e-filing.
All income from investments must be reported. If you are salaried then you should disclose them to our employer before your Form16 is generated. Almost all employers have an online tool which they use to collect the income details of employees before generating Form16.
Mistake# 2) No need to file tax return when tax is deducted
It is a common mistake when filing income tax . People assume they need not file tax returns when tax has already been deducted by employer or TDS is paid. They also think if net income after exemptions is less than Rs.2 lakh then no need to file returns. It is not so. Every individual must file his returns. Why?
Because the amount paid as advance tax or deducted as TDS will be held by Income tax department. The IT department will wait for you to complete self-assessment of your taxes. Only when you file your income tax return, the IT department will acknowledge it and release the amount from its books to the government.
The released amount will be considered as revenue by the Central Government for expenditure. So it is penal to delay your returns which attracts interest if not filed on time.
All individuals (not senior citizens) whose gross income is above the minimum limit (as declared from time to time) are compulsorily required to file tax returns. This limit is currently Rs.2,00,000. Electronic filing is mandatory when the income exceeds a certain limit ie., INR 5 lakhs.
It is very important to note that that tax return papers are also required if you are applying for a loan or giving a visa application. They establish your credit worthiness to institutions.
Mistake # 3)Failure to send ITR form before deadline
The income tax return that you submit will be considered legal only when you send signed copy of the ITR-V form to the IT office. As soon as you complete the income tax e-filing and submit the return, you will be informed about it. But we fall prey to lethargic psychology(I’m guilty sometimes too) and start counting the 120 days period which is available.
Most of the times we will simply forget to send it and this lead to the return being deemed ‘invalid’. To avoid this situation always make it a rule to send the ITR-V as soon as you file the return (preferably next day). It only takes a few minutes to post it so why should you wait for 120 days!
The address to post your ITR form is: Income Tax Dept.— Central Processing Center, P.O Box # 1, Electronic City Postal Office, Bangalore – 560100.
Mistake # 4) Sec 80TTA – No need to report interest income
The Finance Act, 2012 has introduced a brand new section under which the interest accumulated on savings deposit is exempted from tax up to Rs 10,000. However, the interest on recurring deposits and fixed deposits are taxable as per normal rates.
Moreover this needs to be disclosed under the heading ‘Income from other sources’ in the e-form. The interest accumulated from National Savings Certificate is also subject to taxation.
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Mistake # 5) Mistakes in personal data
The most common mistakes when efiling income tax online are related to data errors. You must first register on the IT website before becoming eligible for e-filing. The user id will be your PAN card number. When you are e-filing the tax returns, you need to put in personal details like mailing address, date of birth, email and mobile number.
All communication with the IT department will take place through email. So ensure that you give a valid and functional email address so that proper communication with the IT department is facilitated. The senior citizens should take care in filling up the date of birth field as any wrong information can put them in higher tax bracket.
Also make sure the MICR, Account Number of your Bank account given properly. This is essential for timely delivery/transfer of your income tax refund. Trust me! You don’t want to run behind the tax department.You will lose your hair! Check out income tax official website for common mistakes here
Mistake #6)Not calculating the TDS details
If you are a salaried individual then you must log into the website of the IT department to check the amount of TDS deducted. You can get to know this value by downloading the 26AS. The tax credit for TDS can be claimed in the tax return.
It is your hard earned money. Why should you leave it on the IT department’s table. Pay what is legally due and save the rest of your money.
Mistake #7) Books of accounts not prepared
A majority of the agents who earn a commission do not prepare the books of accounts. If you are from top MNC you would have seen agents in your office entrance in June-July months. They will charge from as low as Rs.100 to Rs 300 to file your income taxes. They will not take care to prepare the accounts which is like your balance sheet.
Their tax return document preparation will just mirror Form16. It might not contain important points which your tax accountant may tell you or prepare for you. If you have side-income from consulting, selling products, affiliate income etc., make sure to report them in your income tax return.
The income from commission will fall under the head ‘Income from business or profession’. This will also require filling up the ITR 4 form. So if you are thinking of bypassing this route and file a return to claim the TDS (deducted by your employer) then you might attract the attention of the IT department.
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Mistake# 8)Reporting the income of the minor
Many people make investment in their child’s name but fail to report it. The rule is to club the minor’s income with that of his parents (one who is enjoying the higher income) when efiling income tax returns.
So your total net income will be inclusive of that earned in your kid’s name. This works just like in PPF where the total highest exemption of Rs.1,50,000 is inclusive of your children’s limit. Learn more about PPF in our Complete PPF Guide
Mistake # 9)Claiming the exemption twice
This is a very common error usually made by salaried persons having multiple Form 16s. This happens when they jump jobs and have worked under more than one employer in the same financial year.
Although the Form 16 shows the deduction of the limit of exemption twice, tax needs to be paid as the individual cannot claim it multiple times. You need to be very careful in filling in the details of the income from both the employers so that there is no discrepancy in the records of the IT department.
Tip: To avoid these confusion, I recommend using www.cleartax.in which allows to add multiple form 16s and has a much simpler process.
There are as many as seven E-forms but out of these only four forms are for individuals. The software will select the form on the basis of the data that is stored in the system but one must be aware of the changes that have been incorporated in the forms. If a wrong form is filled up then the return will be rendered ‘invalid’ and ‘defective’.
Mistake # 11)Not paying taxes on house property
Many people are under the wrong assumption that there is no income from more than one residential property and hence there will be no income tax. However, this is a great mistake and another common income tax efiling mistake.
If you own multiple houses then you are bound to pay income tax even if you have not earned any income from it or it has not been occupied at all. Contrary to popular perception, tax is not payable only for the occupied house.
Mistake #12)Reporting wrong salary figure in tax returns
If you are first time ITR filler then there is every chance that you will be totally confused about the salary figure to be mentioned in the column “Income from Salary.” Please note that ‘income from salary’ is nothing but what has been given under the column “Income Chargeable under the Head Salaries” in the Form 16.
Mistake #13)Not reporting capital gains
Many people fail to realize that sale of assets like property, gold & silver attract the capital gain tax. So one must identify and report if they have any short term or long term capital gains. Secondly you need to use ITR-2 instead of ITR-1 if there are any capital gains.
Hope you had some use from this post. These are just some of the common online income tax efiling mistakes. Tax filing is in itself a process which does not earn you money. But it is a responsibility. So why waste your time by committing mistakes and refiling them. Better to file correctly the first instant.
Comment and let us know what you think of this list. Was it useful?. Do you know some other mistakes which could be added to this list?. Help others by sharing your experience.