Income Tax Return: Be Careful, These 5 Common Errors Will Affect your Tax Liability
The season of filing Income Tax Return has arrived, and now it’s time to take up the responsibility of filing the tax return seriously. Here is a list of 5 serious errors committed by tax payers which not only affects their tax liability but also increases the probability of getting a notice from the Income Tax Department.
1) Failure to report Income from Other Sources:
People often forget to report their income from other sources. Such income can be interest from FDs, interest earned from Savings Bank Account, etc.. The tax payers who have switched the jobs from one company to another often forget to report the income from previous employer in their ITR. People also do not report certain income because they are confused regarding their taxability. They think that the TDS deducted by the Deductor is sufficient and no tax is needed to be paid on it and therefore there is no need for them to declare such income. But, this is not true. Rather, they must report all the income accrued in a year in their Income Tax Return. Therefore, do not forget to declare all the sources of income accrued in a year in your Income Tax Return.
2) Failure to report Income from Minor Child
Some tax payers invest in the name of the minor child such as Fixed Deposits, Recurring Deposits, Bonds, etc. As some or the other income is earned every year on these investments, people think that these income belong to their minor child and hence it is not required to include them in their Income Tax Return. Whereas the clubbing provision of Income Tax Law specifically states that all the income accruing to the minor child must be included in the hands of a Parent whose income is higher. An exception to this rule is applicable on Children who are earning income due their own skill or talent such as Child Artists, Sports Kids, etc. A minute sigh of relief has been given in the form of exemption of Rs. 1500 for each Minor Child whose income is clubbed with Parent’s income. So, report all the income of your Minor Child in your Income Tax Return this year.
3) Failure to report Exempt Income:
Hasty filing of Income Tax Return may lead to omission of exempt income. An individual can have exempt income such as dividend, long term capital gain on equities, interest on provident fund, etc. As Income Tax Department specifically asks for the details of exempt income, failure to report such income may lead to unnecessary nuisances in future.
Let’s understand the situation with an example.
Ms Poonam had a long term capital gains on Sale of Equities of Rs. 20 Lakh Rupees in 2014, and she used those earnings to purchase the Property. But, she failed to mention the exempt income of Rs. 20 Lakh in her ITR. This will make Income Tax Department suspicious about her income and thus she may end up getting notice from Income Tax Department about the source of funds used for purchasing the Property. So, it is always advisable to properly report exempt income while filing the Income Tax Return.
4) Mistakes in claiming Tax Benefits:
Many taxpayers are not aware that they are eligible for tax savings for Health Insurance premium in the form of Section 80D, and thus they end up paying higher taxes. Tax Savings Deductions that are mostly forgotten to claim are deduction u/s 80TTA for the interest received on Savings Bank account, payment of tuition fees u/s 80C, etc.
Some do not properly claim deduction of repayment of Principal Amount in case of Home Loan and while some forget to claim deduction for Donations made to various NGOs. Thus, you should be very careful to properly claim all the deductions while filing the Income Tax Return as it will reduce your tax burden up to a certain extent.
5) Discrepancy in TDS details:
You should not be ignorant about any discrepancies in your TDS details in Form 26AS as it may lead to additional tax liabilities. So, you should check your form 26AS before filing the Income Tax Return and report the problems (if any) immediately to the appropriate authority.
It may be that the Employer has deducted the TDS but not deposited it with the Government or quoted incorrect details such as Name, PAN, etc. in their TDS return. As a result, you might not be able to claim Tax credit with respect to TDS deducted by the Employer. Consequently, you may have to pay Income Tax from your own pocket. Therefore check your Form 26AS before tax filing and if any discrepancy is observed, take corrective measures to remove it.
Now you can clearly understand that though these errors may appear to be smaller, it significantly affects the income tax liability. So, avoid such mistakes and enjoy hassle free Income Tax Return filing
[The article has been authored by Abhishek Porwal of mytaxcafe.com, which helps people to e-file their income tax return easily.]