Things to keep in mind while filing your income tax return this year | Business Standard News

Clipped from: https://www.business-standard.com/article/pf/things-to-keep-in-mind-while-filing-your-income-tax-return-this-year-121091000765_1.html

Ensure you file your returns ahead of time, in case you need to make changes

income-tax department

The Central Board of Direct Taxes (CBDT) has decided to extend the due dates for filing of Income Tax Returns (ITR) further for Assessment Year 2021-22. The new deadline for individuals whose accounts are not to be audited, is December 31. Previously it was September 30. This deadline extension is because of technical glitches faced by several taxpayers. However, many have been able to file ITR smoothly. According to the tax department, over 100,000 income-tax returns are being filed on the new income-tax portal every day. Even though the deadline has been extended, it would be better to try to file your return sooner, instead of waiting for December. Filing ITR is no longer a 20-minute process even if done online. Here’s a checklist by tax experts on mistakes to avoid while filing ITR.

New tax regime or old tax regime: This year there is an option of filing ITR under the new or old tax regimes. Under the old regime, the taxpayer will get deductions and exemptions, while under the new, the tax rate is lower, but without all deductions and exemptions.

Suvigya Awasthy, associate partner, PSL Advocates & Solicitors, says, “It is recommended to select the better of the two to optimise your tax-saving. The idea is to make the compliance process less tedious through the removal of tax deductions and exemptions. The new budget tries to curtail the option to save and puts more money in the hands of taxpayers.” However, individuals and Hindu Undivided Family (HUF) are given an option to choose between the old and the new tax regime. Vivek Jalan of Tax Connect Advisory Service says, “Ideally the old employees who have set processes of investments in tax-savings schemes should opt for the old scheme and the others should go for new scheme.” Tax under the new regime is payable at lower slab rates as compared to old regime, on an income of up to Rs 15 lakh. Under the new regime tax slabs rates of 5 per cent, 10 per cent, 15 per cent, 20 per cent and 25 per cent are applicable on each successive increase of Rs 2.50 lakh, starting from the basic exemption of Rs 2.5 lakh till Rs 15 lakh of total income.

Choose the correct ITR form: There are separate ITR forms for different sources of income. Moiz K Rafique, managing partner, Privy Legal Service, says, “Any mistake committed while undertaking filing of ITR can be corrected by revision if such a filing is made before the deadline and if not attracting penalties. Such revisions can be made under section 139(5) of the I-T Act for such discoveries like omission or wrong statement, keeping in mind that such revisions are also carried out before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.” It is, however, possible that in a few cases, the return filed in a wrong form would be treated as valid as the return may be structurally fine. In all other cases, the filing will attract penalties.

Not reporting interest income from savings account: Interest income from saving bank account must be reported under the head Income from other sources while filing Income Tax Return. Kapil Rana, founder & chairman, HostBooks Limited says, “However, a resident individual aged under 60 years can claim deduction of up to Rs 10,000 under section 80TTA.” But a resident individual aged 60 years or more can claim deduction of up to Rs 50,000 under section 80TTB.”

Rana adds, “Non-reporting of interest income will be considered as misreporting and the assessee may receive notice from Income Tax Department.”

Not matching income and TDS with details in Form 26AS: Ensure you check form 26AS before filing the ITR.

Form 26AS includes all the income details, Tax Deducted at Source (TDS), advance tax paid self-assessment tax, inter alia. It is an annual tax statement having details of all the income earned during the financial year. Therefore, details provided in the ITR should match the income details on Form26AS. Manish P Hingar, founder, Fintoo-investment and tax advisory firm says, “You are sure to receive a notice from the Income Tax Department if the income you declare does not match the amount in Form 26AS. If the amount you declare is lower, it will be regarded as an attempt to understate the actual income.”

Not reporting dividend income: While filing the tax return for AY 2021-22, the dividend income has to be shown as taxable. Naveen Wadhwa, deputy General manager (DGM), Taxmann says, “Earlier the dividend was exempt in the hands of shareholders, but now it has become taxable and is required to be disclosed as ‘Income from other sources’.” The quarterly break-up of dividend income is to be reported in the ITR form i.e. dividend earned up to June 15, 2020, from June 16 2020 to September 15, 2020, from September 16, 2020 to December 15, 2020, from December 16, 2020 to March 15, 2021 and from March 16, 2021 to March 31, 2021. Wadhwa says, “Dividend received in excess of Rs 5,000 is also subject to 10 per cent TDS, so the non-reporting of such income may invite a notice from the tax department.”

Reporting exempt income: Certain types of income are exempt from tax, as provided under Section 10 of the Income Tax Act. It is, however, important for the taxpayer to disclose the details of such income in his income tax return. Nikhil Varma, managing partner, Miglani, Varma & Co (Advocates, Solicitors and Consultants) says “Such details must match with Form 26AS details that the income tax department collects from several sources. Not disclosing exempt income in the ITR could make it difficult for a taxpayer to explain the source of a particular income in future.”

Forgetting e-verification:The income-tax return is deemed to be filed only if the taxpayer, after filing of return, verifies it. Verification of return is mandatory to get it accepted and processed by the Centralised Processing Centre (CPC). The process of verification has to be completed within 120 days of ITR filing. Wadhwa says, “An income-tax return can be verified with a digital signature, an electronic verification code, an Aadhaar-based OTP or submission of acknowledgement to CPC Bangalore. If you fail to either e-verify it or post it, the return will be treated as an invalid return.”

These are just a few of the key things to note while filing returns this year (See table). Most individual taxpayers file their own returns, making them prone to some common errors. Varma says, “Taxpayers must be very cautious while furnishing details of capital gains, probably the most complex part of the entire form. The smallest error in this section could cost the taxpayer higher interest and other issues.” Ensure you file your returns while you have ample time at hand, in case you need to make changes. There is no limit to the number of times you can file revised returns, but once the scrutiny of assessment is completed under Section 143(3), returns cannot be revised. Hence, don’t wait till December 31 deadline.

Don’t forget the following

  • The taxpayer needs to report all his bank accounts held by him in India
  • The taxpayer is required to report details of investments in unlisted equity shares and the number of shares acquired and sold during the year
  • The taxpayer needs to provide information if he/she is a director in a company along with details of whether, or not, shares of the company are listed on a recognised stock exchange
  • Schedule assets and liabilities if net taxable income (after deductions) exceeding Rs 50 lakh in a financial year
  • Ordinarily Resident individuals are obligated to furnish details of their assets held outside India (both as owner and as beneficiary)
  • Verify pre-filled information to avoid incorrect data and make e necessary changes in income not reported therein in the tax return

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s