Why you should avoid filing tax returns before 15 June

Those who are opting for the new tax regime have to fill and submit form 10IE along with their ITR. (Photo: istock)
Those who are opting for the new tax regime have to fill and submit form 10IE along with their ITR. (Photo: istock)


Taxpayers in India must manually edit pre-filled information on auto-populated ITR forms, as they are not error-free. This year, income from cryptocurrencies and virtual digital assets must be reported under a separate section titled Schedule VDA.

The income tax department has opened its portal for individuals to file their taxes for the current assessment year (fiscal 2022-23) and the deadline to do so is 31 July. While it’s a good practice to file income tax returns">income tax returns (ITRs) early, experts have a warning for the early birds: your annual income statement (AIS) could be outdated.


Data pertaining to tax deducted at source (TDS) and the statement of financial transactions (SFT) usually reach the government on 31 May and take 15 or more days to get updated. SFT documents certain high-value transactions carried out in a particular financial year. These include credit card payments, cash deposits other than that in the current account, time deposits, share buybacks, etc., each aggregating to 10 lakh or more.

“We have seen that taxpayers who file their returns early often find a mismatch in transactions when the TDS data gets updated at the backend. So, it would help if you do not file your ITR before 15 June," said Karan Batra, founder, Charteredclub.com. AIS displays the date till which your data is updated and it would do well to cross-check this data before filing the ITR. Apart from AIS, salaried individuals must wait for their employers to issue Form16 so that the information can be reconciled with Form 26AS and AIS.

What to look for in AIS

In the last three years, the IT department has made ITR filing">ITR filing comprehensive by increasing the scope of the information to be reported in the tax return and introducing AIS. The latter contains information on almost all the financial transactions in a fiscal year and misreporting of any income or transaction included in the AIS will get you on the taxman’s radar. One must cross check all the incomes given in AIS with the TDS certificates, interest income certificates and Form 26AS and raise a query if there’s a mismatch so as to get it rectified.

However, experts say taxpayers cannot blindly rely on AIS alone for reporting all incomes and transactions. For one, Futures and Options (F&O) and intra-day trades are not reported in AIS, so you will have to manually check for this data in statements provided by your broker. Second, data on capital gains made from stocks is usually incorrectly reported in the AIS. “As per the T+2 settlement cycle, the share price that NSDL reports is of the second day after the stock is sold. However, the department is aware of this discrepancy, so notices have not been sent for this particular mismatch," said Batra. Taxpayers must report the correct values and not those reported in the AIS. From 27 January, all instruments have moved to the T+1 settlement cycle.

View Full Image

Auto-populated ITR forms help, but they are not error-free either. “Sometimes, there are additions or deletions that have to be made due to discrepancies in pre-filled information. Taxpayers can manually edit these," said Maneet Pal Singh, partner, I.P. Pasricha & Co.

Report crypto, NFT

This is the first year when income from cryptocurrencies and other Virtual Digital Assets (VDA) have to be reported. A separate section titled Schedule VDA has been included in ITR forms, except ITR-1, to report such income. “Salaried taxpayers who opt for the simple Sahaj (ITR-1) form will have to opt for ITR-2 if they have transacted in cryptocurrencies in the previous financial year," said Prakash Hegde, a Bangalore-based CA.

The 2022-23 Budget had proposed a flat 30% tax (cess and surcharge extra) on crypto assets. Taxpayers have to give scrip-wise details of all eligible transactions under Schedule VDA. The details include date of acquisition, date of transfer and head under which income is to be taxed.

“Under the Income Tax Act, there are five heads of income: salary, house property, PGBP (Profits and Gains from Business or Profession), capital gains and income from other sources. In respect of VDAs, it can be taxable as business income if the assessee is treating VDA as stock in trade. If these are treated as investments by the assessee, income from it can be taxed as capital gains," said Singh.

Even cryptocurrencies that are received as gifts have to be reported in the ITR. Taxation rules on gifts apply to cryptocurrencies also. However, gifts from parents and siblings are exempt from tax irrespective of the value.

Form for new regime

Those opting for the new tax regime have to fill and submit form 10IE along with their ITR. “Business professionals are allowed to switch between the old and the new tax regimes only once, unlike salaried individuals who are not subject to such restrictions. Through this form, the IT department can easily track this activity," said Nitesh Buddhadev, founder, Nimit Consultancy.

Take note that salaried individuals who file ITR in form 3 because of F&O or to report freelance income, if any, will be treated as business professionals and will be eligible to switch between the two tax regimes only once.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.



Switch to the Mint app for fast and personalized news - Get App