The attention we give to playing BrickBreaker on the BlackBerry is not the same that we give the screen while filing our tax returns. The first is fun and a reminder of what our work can buy—a gadget and enough leisure to play a game on it. The second brings home the fact that the first third of the year we work as slaves for the government. 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. Some portals simply ask you for a scanned copy of Form 16, Form 16A, and copies of income from other sources; the software detects the data and fills the form automatically. But here are nine things you need to be careful about.
1. Choosing 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. If you make a mistake in choosing the right form, the entire exercise of filling will go waste.
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 (cases where loss is brought forward from previous years excluded).
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 an 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 or profession.
ITR4 is for individuals having income from business or profession (such as commission agents, anyone dealing in futures and options, doctors, chartered accountants, lawyers and small shopkeepers).
2. Signing a blank form
While finding time for that game of BrickBreaker is not so difficult, it is often the case that you don’t have enough time to file returns yourself and you are willing to hire an agent to do the work for you at an extra cost. In some cases, this may be due to lack of knowledge, too. Whatever be the 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. There have been instances where agents have filled the form in such bad handwriting, that the forms could not be processed. Then, there is always the risk of your data getting compromised.
3. Number jumble
You miss scrolling your mobile pad and the game goes back to level 1. Similarly, you miss filling in one number or character of your permanent account number (PAN) and the form cannot be processed. Besides, you could be levied with a fine of Rs 10,000 for an incorrect PAN entry, as per income-tax rules. Says Saakar Yadav, director, Myitreturn.com, an e-filing portal, “Incorrect PAN is a common silly mistake.”
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. Ensure you fill these details correctly or your refund may get delayed unnecessarily.
Double check all the numbers before submitting the form or handing it over to your agent.
4. Filling in outdated or old details
Job changes and transfers are so common these days that most land up staying in rental accommodations, which needs to be changed every 11 months, or working people hostel where accommodation is permitted for a couple of years. Moreover the office email ID keeps changing with every job change and in some cases even location change. But the ITR form needs both—your physical address and email address.
In fact, email is a preferred route for communication for the income-tax department. Says Ankur Sharma, CEO, Taxspanner.com, a tax filing portal, “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. One should make sure that a valid and functional email ID, which you regularly access, is provided in the form.” In other words, avoid giving your office email; instead give a personal email account, which you use regularly.
For your physical address, it is always safer to give a permanent address instead of your rented accommodation. “If you are staying in a rental accommodation or hostel, avoid mentioning that address on the form. Instead, mention your permanent address, even if it’s in a smaller town,” says Yadav. 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.
5. Not taking into account multiple Form 16s
If you’ve changed jobs in the middle of a financial year, ensure that you collect Form 16s from both the employers. Many make the mistake of reporting only the current employer’s income in their returns. Since you’ve availed tax benefits from both employers, there could be a good possibility that you still owe some additional tax liability at the time of filing tax returns. If you have not shown your savings with the previous employer to the present employer, there is also a chance of paying extra tax, especially if you are in the high income bracket.
6. 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. While only short-term gains are taxable for equity mutual funds, both short- and long-term gains from debt funds are taxable. Mamtha Banerjee, founder and CEO, Taxyogi.com, says, “This is another mistake which is common, where individuals fail to give all the necessary information on income from other sources, in such a case a revised returns needs to be filed.”
Other heads for income from other sources could be from property transaction, gains on investments or rent received from a house you own.
7. Not Stating TDS details for interest income
Since all banks deduct tax at source for interest accrued on your fixed deposit accounts, it doesn’t mean you don’t assess your tax liability and mention it in your form. Says Sharma, “In reality, banks only deduct 10% tax deducted at source (TDS) on interest income, whereas you may be in the higher tax slab of 20% or 30%. Recently, the income-tax department has started reconciliation of TDS data received from banks and the interest income reported by individuals in their returns.” So if you don’t give information about interest income in the return form, there is a chance that you may receive a notice from tax department.
Get Form 16A from your bank. The portal will take into account Form 16A details you’ve added and compute the data.
8. Reversal of deduction
Another common mistake is that most people do not know that if they sell their house within five years of getting its possession, the deductions availed on the home loan are reversed in a way. Sharma says, “Any instalment 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.” Simply put, you should avoid selling your house before completing at least five years of possession.
9. 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. Says Banerjee, “You are supposed to take a print out of ITR V, sign it and send it to the income-tax department’s Bangalore office within 120 days. Many forget to send the signed acknowledgement.” Unless you send the acknowledgement, you technically are not done with the entire process of filing returns.
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.
Illustrations by Jayachandran/Mint.
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