Filing tax returns can be an overwhelming task if done at the last minute.
When the income tax deadline is just around the corner, most of us start scrambling in search of bank statements, receipts, and other documents.
Personal finance experts suggest that the more you rush up the process, the higher are the chances of making mistakes. These mistakes can result in refund delays, penalties, and even the risk of a tax audit.
If you are filing your tax returns in the eleventh hour, make sure that you avoid these 9 common mistakes-
1. Filing ITR Using the Wrong Form
There are 6 different ITR forms for individuals and 3 for firms and companies. As per the tax laws, you need to report all the income sources and file the returns using the right form applicable to you. If you use a wrong form to file your returns, the tax department will treat your returns as ‘defective’ and you’ll be required to file ITR again with the right form.
2. Not reporting interest incomes
Several people do not consider the interest they have earned from different sources when filing ITR. You should know that only interest up to Rs. 10,000 earned from a Savings Account is exempt from taxes and no such rule applies to Fixed Deposits. It is possible that collectively, the interest from Savings Account might be more than Rs. 10,000. So, make sure that you do report all the interest you’ve earned when filing ITR.
3. Not filing income tax returns
Not filing tax returns can result in a jail term of up to 7 years. While in most of the cases, the tax department only issues a notice which if neglected would result in a penalty, prosecution is a possibility. If you have missed the ITR filing deadline, you can file a Condonation delay request which the tax department might accept in some cases.
4. Not clubbing incomes
As per the income clubbing rule, the income of specified persons like your spouse, minor child, etc. should be added to your income before calculating the total income and tax payable. If you do not add these incomes, you’ll be required to pay the remaining tax on this additional income along with interest. It can also result in a penalty for misreporting or under-reporting your income.
5. Not reporting income from the last job
People regularly change jobs nowadays but they often forget to consider the income from their previous jobs when filing ITR. If you do not report the income from your previous jobs, your TDS certificates will reflect the error. The penalty for this is similar to the penalty of not clubbing your income.
6. Not reporting tax-free incomes
Even if the income is exempt under a section of the tax law, you still need to report it when filing ITR. All the exempted incomes should be reported under the ‘Exempted Income’ section of the returns form.
7. Not reporting all bank accounts
In the past, taxpayers were only required to provide details of the bank account in which they wanted to receive the tax refund. However, from FY2015–16, you need to report all your bank accounts except for the dormant accounts. Not reporting the bank accounts can result in penalties.
8. Getting basic details wrong
Double-check all the personal details like email address, bank account details, mobile number, etc. when filing ITR. Any error in the bank account details can delay your TDS refund and any kind of mistake in address or email address would mean that you might miss important notices or acknowledgement from the tax department.
9. Mistakes in claiming deductions under section 80C
Some people believe that the EPF contribution of the employers should be included to claim section 80C benefits. However, this is incorrect. Moreover, only principal amount of a housing loan repaid can be considered under section 80C. Similarly, there are several other deductions which you should take care of when claiming 80C benefits as they can result in rejection and tax liability.
Any kind of error when filing ITR can result in a lot of problems, penalties, and in some cases, even jail term. Never wait for the last date to file the returns and make sure that you avoid the mistakes mentioned above to file the return correctly on time.