An incorrect form can render the return defective; under certain circumstances, you may have to file a return even if your income is below the exemption limit
The due date for filing income-tax returns for FY20 has been extended to November 30. This year, the tax department has notified seven various forms–ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 & ITR 7, –and you must choose the right one to avoid future issues.
Archit Gupta CEO Cleartax says, “A wrong ITR form makes the return you have filed defective.” To ensure that your return filing is free of errors, you must understand the exact form you need to use (see table). Note that only five forms are to be used by individual taxpayers, depending on their income levels, sources of income and other rules. In case you make a mistake, an assessing officer can issue a notice to you, and you get 15 days to correct the defect from the date of intimation.
Gupta says, “In case the taxpayer fails to correct the defect within the time allowed by the assessing officer, the defective ITR becomes invalid. In such a case, the taxpayer is treated as non-compliant with his ITR filing.”
In case, you do file the wrong form, you still get a chance to rectify your mistake though. Kapil Rana, Founder & Chairman, HostBooks Ltd, says, “Returns filed with wrong ITR forms should be revised as per the provisions of section 139(5) of the Income Tax Act within the time allowed.” For example, if an individual has Salary income, One house property income, interest income from bank and net agriculture income more than Rs 5,000, and has filed his return of income in form ITR 1 by mistake, in such cases, he should revise his return suo motu under section 139(5) within the time allowed. So the smart thing to do is choose the correct form in the first place itself, and avoid common mistakes.
Other mistakes to avoid: There are other common mistakes that can be easily avoided. For instance, choosing the wrong assessment year for filing in, incorrect personal details such as mailing address, and phone number, and such like. You should furnish the latest details while filing your return.
Gupta says, “Another common mistake is non-disclosure of income on which TDS is deducted. Taxpayers often mistake TDS to be payment of tax dues on the income they have earned; one has to make sure that corresponding income has been included.” At the time, you might inadvertently not disclose all sources of income such as gains or losses from investments, income from other sources, such as interest on recurring deposits. Another common mistake is the non-disclosure of salary income from the previous employer in case of a change in employment during the financial year.
Important changes: The Income-tax Department has made several changes in the ITR forms applicable for tax filing for FY 2019-20, one such being the new Schedule DI to furnish details of investments made during the extended period.
Rana says, “Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, have extended the time limit till July 31, 2020, to make investments, deposits, payments, etc for FY 2019-20 for claiming deduction under Chapter VI-A, section 10AA and sections 54 to 54GB.” In short, the time limit for making tax-saving investments has been extended by four months.
Vivek Jalan, Partner, Tax Connect Advisory Services says, “Since the income tax department has allowed taxpayers leeway in making certain tax-saving investments for FY 2019-20 till June 30, 2020, in view of the coronavirus lockdown, the investments from April 1, 2020, to June 30, 2020, need to be separately disclosed and benefit of the same can be taken.”
Another change is that now you can choose multiple bank accounts for payment of the refund. Also don’t forget that the Section 80EEA and Section 80EEB which were introduced by the Finance (No. 2) Act, 2019, as these provide deduction in respect of interest on housing loan and interest on loan taken for electric vehicles respectively.
Jalan says, “Under Basic information in ITR 2, the assessee needs to disclose information about his directorship in companies or holding of unlisted equity shares. It is now of importance that taxpayers take stock of not only their income but also of their assets. Hence a personal balance sheet noting the assets and liabilities of the taxpayers should be made.”
Another change is the separate reporting of surcharge on income chargeable to tax under certain sections in the forms. From now on, if you have not been allotted PAN, but have an Aadhaar card, you can give the Aadhaar number in lieu of PAN.
Rana says, “To ensure that individuals entering into certain high-value transactions furnish the ITR, the seventh proviso to section 139 was inserted by the Finance (No. 2) Act, 2019.”
The provision requires every person to file a tax return during FY 2019-20 if he has:
i. Deposit of amount or aggregate of amounts exceeding Rs 1 Crore in one or more current account during the previous year.
ii. Expenditure incurred of an amount or aggregate of an amount exceeding Rs 2 lakh on travel to a foreign country for oneself or for any other person.
iii. Electricity bills of an amount exceeding Rs 1 lakh during the previous year.
Even someone who is otherwise not required to file ITR as his income does not exceed the exemption limit, will have to file one now, in case he meets any one of the three criteria above.
Table: ITR forms for AY 2020-21
|ITR 1||Resident Individual with income up to Rs 50 lakh; Income from salary/one house/ others source|
|ITR 2||Income from salary > Rs 50 lakh; Income from unlisted shares; Income from foreign assets; Income from lottery|
|ITR 3||Income from business and profession|
|ITR 4||Paying tax under presentive income scheme for professionals with gross receipt below Rs 50 lakh and business with less than Rs 2 crore turnover|
Source: IT Department website