Avoid these 8 mistakes while filing your Income tax return before July 31

Filing your Income-tax return is something most people dread. It's black and white, weird and confusing, and the return has all kinds of new terms, which immediately makes you feel overwhelmed. You might feel the need to have some finance geek sit next to you. 

Now, irrespective of whether you have expert help or not, making mistakes in your ITR filing will only annoy you and increase the time you spend on your return filing.

So, look out for these ITR mistakes:

1. Not filing your Income-tax return

If you don't file your ITR, the Income-tax department can serve notices and ask you to file your ITR. If you don't file even after receiving notices, the department can assess your taxes and demand you to pay taxes based on information received by them from other sources. The penalty is worse if you have income from foreign assets or are a beneficiary of foreign income and have not reported them. 

2. Missing the tax return due date 

The due date for filing ITR for the FY 2020-2021 for individuals is July 31, 2022. Last year, however, the government extended the due date to September 30 because of the pandemic. If you miss filing the return by the deadline, you might have to pay: 

• Late fees of up to Rs 10,000 and a
• penalty interest of 1%

3. Using the wrong Income tax return form 

The ITR form applicable to you depends on your sources of income and where they come from. So for eg: If Amar is a salaried employee who makes money only through his salary, he can file ITR 1. But if Akbar, Amar's colleague makes money through capital gains on his investments and also earns a monthly, then Akbar needs to file ITR 2. If Anthony is self-employed and makes money through his business income, then he needs to file ITR 3. Many websites usually make adequate disclosures regarding which forms to use while filing, but mistakes are still made. 

A wrong ITR can be rejected and the department can levy a penalty or interest for non-filing since it will be assumed that you haven't filed one. 

4. Check your Bank statements 

Your bank statements (especially the credit side) show different kinds of incomes like savings account interest, interest on bonds, and dividend income, which though reflects directly in your bank statement, may not reflect in other documents like 26 AS. Since you can claim deductions on interest on your savings account, it is better for you to review your bank statements before you file your return. Also, it is better if you disclose all your bank accounts instead of simply mentioning your main bank account which is credited with your salary or which receives most of your income. 

5. Exempt / Non-Taxable Income 

Agricultural income is exempt from income tax and you usually get a 30% deduction after computing 'Income from house property'. LIC amount is exempt when it is received on maturity and so is interest from PPF and tax-free bonds. But just because you get a deduction or the income is exempt, does not mean that you don't have to disclose it or mention the net amount. You have to mention all incomes and the gross amount of the incomes, wherever necessary. 

6. Check your AIS and 26AS

The Annual Information Statement (AIS) is a statement that gives taxpayers a single comprehensive statement on all their financial transactions done in a financial year and contains financial transactions reported by banks, RTOs, stock exchanges, etc., with the Income Tax (I-T) department.

Form 26AS is a consolidated annual tax statement that shows the details of tax deducted at source, tax collected at source, and advance tax paid by the assessee with self-assessment tax. This information is specific to a Permanent Account Number (PAN) and tax filers who have made any high-value transaction during the financial year are required to furnish a statement of such transactions to the income tax authority.

Taxpayers have to reconcile AIS and 26AS and in case of any errors, flag them to the IT department, since this is available with the IT department and is assumed to be true unless changed by the assessee. 

7. Capital Loss on Sale of Shares, Mutual funds, and Property

It is easy to miss out on these transactions and not report any loss on the sale of assets because people usually feel that they don't need to show losses in these cases. But since losses can be carried forward to the next few years, the assessee can set it off against next year's income if it belongs to the same category. 

8. Double/ Wrong deductions

If you are claiming HRA in your return, you cannot claim another deduction under section 80GG, cause' you can only avail the benefit of one section. Similarly, you have to check the deduction limits when you actually contribute money towards particular funds. For eg: If you contribute to any local authority, institution, or association for any charity purpose other than the purpose of promoting family planning or any notified temple, mosque, gurudwara, church, or other place notified by the CG (for renovation or repair), you can claim a deduction of 50% only. But you may be tempted to take a deduction of 100%.