This is that time of the year when tax-payers rush to file their income tax returns. When going through this filing process, it is important that all the correct details are filed and more importantly, in the right sections.
Remember that mistake in the process could come back to haunt you at a later stage. And the penalties would include, besides monetary losses, a lot time and effort. Here are some common mistakes that are made very often:
Common mistakes
- Fill in all the correct addresses of employer and property owned, if any
- In case of any transfer between funds, account for the capital gains/losses
- Bank interest income on deposits, though small, has to be accounted for
- When shifting jobs, there could be double benefits under Section 80C. Clarify this in the returns papers
- Income from other sources have to be specified
Inadequate information: In the new form, there are specific spaces present where the individual has to disclose the right information. In many cases, they miss out on several items. A good example is for the salaried, there is the requirement in Form ITR 2 to mention the name and address of the employer.
There is a specific section where this disclosure has to be made. Similarly, in case of a house property, the owner has to mention the location of property. Often such sections are left blank leading to queries at a later date because the form does not contain the necessary details. A little bit of homework is essential to ensure that all such information is given in a detailed manner.
Savings bank interest: A very important item, but ignored by many. Though the amount may be minuscule and not sound relevant, it is essential to mention all the details of the income earned. For instance, the interest income on savings bank account may be a few hundred rupees or less.
However, this innocuous sounding amount has to be diligently accounted for because it comes under the income head. Hence, even if you fail to mention it, there will be a tax liability that will be outstanding against your name.
Capital gains ignorance: When investing through a systematic transfer plan of mutual funds or even switching between schemes, though there is no direct transaction with the bank because money is transferred between two mutual fund schemes, you have to make the right entries.
Often, such transactions are ignored, but there are some capital gains that has to be declared to the authorities. The amount of the capital gains that do not come under taxation may vary, but care has to be taken lest it comes under default at a later date.
Double benefit for the salaried: Sometimes when shifting from one employer to another during the financial year, you have to fill in two investment proofs to both the employers.
In many cases, there is double benefit that comes to you for the same investments made because both the employers consider the same investment of Rs 100,000 and provide benefit to the employee. The onus here is on you to check and ensure that there is no double benefit taken otherwise there will be a large liability that can arise in the future.
Inconsistent details: In several cases, there is an inconsistency in the details provided while filing income tax returns. Like missing out on interest income from National Savings Certificates or showing investments that are not justified by the income earned. Some of these could be simple mistakes but others would have to be explained property.
If this is not done properly then there is a very good chance of the tax department raising demand for various taxes that could actually have been avoided. For example, a large inheritance could have led to a large investment though the income earned during the year could be rather low. In such a situation, unless disclosed properly, the source of the funds for the investment there can be a high tax liability. In short, avoid simple mistakes and disclose all facts to have a hassle-free tax position.
The writer is a certified financial planner
