8 Common mistakes in ITR often made by Taxpayers
8 Common mistakes in ITR
The deadline to file income tax return (ITR) has been extended to August 31, 2019. However, while filing your tax return, you should do it with utmost care. If you make a mistake, you could end up with a tax notice from the department asking you to explain the discrepancy and pay tax, if any.
Here are eight mistakes that are often made by taxpayers.
1. Filing ITR using the wrong form:-
An individual can determine which form is applicable to him for filing ITR depending on the sources from which income is earned in the financial year. For instance, ITR-1 is applicable to an individual who has earned income from salary/pension, has only one house property and interest income. However, if a person has incurred any long-term capital gains (LTCG) by selling of equity shares and equity mutual funds, then he/she has to file ITR-2.
2. Not reporting incomes from investments:-
From this year, individuals are also required to report and pay tax, if any, on LTCG arising from the sale of equity shares and equity mutual funds. Similarly, while interest received or accrued on fixed and recurring deposits is fully taxable, however, one can claim a deduction on interest earned from savings bank account up to a certain limit. Section 80TTA of the Income Tax Act provides that interest up to Rs 10,000 can be deducted from the total interest earned in a year from bank and post office savings account for individuals below the age 60 years. On the other hand, senior citizens can claim deduction of up to Rs 50,000 for the interest received or accrued under section 80TTB. The interest under section 80TTB can be earned from deposits held with bank such as FDs, recurring deposits (RDs), savings account, post office schemes like time deposits, Senior Citizen Savings Scheme and so on. Deduction can also be claimed for interest from deposits held with co-operative banks.
3. Not reporting exempt income in ITR:-
Income tax laws requires a taxpayer to report all their income, whether exempt from tax or not. It is mandatory for a taxpayer to file his/her ITR if the gross income exceeds Rs 2.5 lakh.
4. Not clubbing incomes:-
According to the Income Tax Act, there are certain instances where the taxpayer is required to club the income of his minor child or spouse with his income and pay taxes accordingly.
5. Not reporting income from the last job:-
If you have switched jobs in FY 2018-19, then income from your previous job must be reported while filing ITR along with income from the current job. If any income (from previous job) is not reported, then a discrepancy is bound to reflect in your TDS certificate (Form 16) and Form 26AS. The tax department can send you a tax demand notice asking you pay additional tax dues, if any. Do keep in mind that the new format of Form 16 has a row where income from other employers can be reported by your current employer. Therefore, do check if the Form 16 received from your current employer includes such income.
6. Not reporting all bank accounts:-
While filing ITR for financial year 2014-15 onwards, a taxpayer is required to report all the bank accounts held by him.
7. Not declaring deemed rent/expected rent:-
If you own another house apart from a self-occupied house and it is lying vacant, then you are required to report the expected rent in your gross total income. While filing ITR for FY 2018-19, you are required to report such income and pay tax, if any. In case loss has occurred due to interest payable on housing loan, then maximum set-off of loss from house property has been capped at Rs 2 lakh in a financial year.
8. Failing to revise your income:-
If you have discovered an error after filing your tax return, then you must rectify your mistake. You must file the revised return to rectify your mistake. An individual can file the revised return within one year after the expiry of relevant financial year. The last date to file revised return for FY 2018-19 is March 31, 2020.
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