Filing of Income Tax return may sound strenuous to most of us, yet many of them file our ITR on our own. Every individual, who has an income above the basic exemption limit wants to claim a refund, made deposits of more than Rs 1 crore in bank accounts, has spend more than Rs 2 lakh on foreign travel for self or any other person or has paid electricity bill of more than Rs 1 lakh in the financial year is liable to file income tax return.
While filing the return of income there are certain points which you need to keep in mind to avoid any kind of error or notice from the department:
1. Selecting the correct form
Selecting the correct form is of utmost importance because if you do not select the correct form you can expect a defective return notice from the income tax department. Eg: ITR 1 which is also known as 'Sahaj', because it is very easy to file, is only applicable for residents who have income from salary, pension, one-house property and income from other sources like savings interest , FD interest. However, the aggregate of all such incomes should not exceed Rs 50 lakh but if any such individual is a director in any company or holds unlisted shares then he cannot file ITR 1, however, they can show an exempt income where exempt agricultural income should not be more than Rs 5,000. In a similar way other ITRs also have different set of rules.
2. Mis-reporting or under-reporting income from investments
Sometimes knowingly or unknowingly we do not report income from investments. Now with the wider scope of Statement of Financial Transactions (SFT), the chances of getting a notice increases manifolds if you do not declare your income from investments or mis-report it.
A very common error which mostly people make is when they have made investments through Systematic Transfer Plan (STP) and they have not redeemed any mutual funds, so they do not report any capital gains whereas in case of STP it is considered that the investments have been redeemed from liquid fund and then invested in equity or debt fund which gives rise to capital gains. Other few incomes from investments which people forget frequently are savings interest from all bank accounts, fixed deposits , recurring deposits, etc.
3. Ignoring provisions of clubbing of income
Majority of people are not aware of clubbing provisions wherein sometimes minor child’s income or spouse’s income is clubbed in your income. If you do not club such incomes in yours as per the provisions of the Act, it is a violation of law.
4. Not including previous job’s salary
Many a times people switch jobs in between a financial year but they forget to include salary received from previous employer in their income. In fact, it has been seen often that previous employer is not approachable for Form 16, but this does not mean that we do not include that income in our financial year income. In such cases, where we do not get Form 16 from previous employer, we must use our salary slips and tally with bank statements and include such income on our own. More importantly, we need to check Form 26AS in all cases and check all such incomes that have been reported there.
5. Verification of return
Mere filing of return is not considered as a complete process, verification of return is equally important, without which your return is not taken up for processing. Verification is to be done within 120 days of filing of return and can be done by any one of the many options available such as Aadhaar OTP, Dmat account, bank account, net banking ,ATM or physical verification by sending a physically signed copy of ITR V to CPC Bengaluru.
6. Checking pre-filled details
The Income Tax department has made the filing of ITR quite easy by launching the facility of giving pre-filled forms to the tax payers. But it is not necessary that all the pre-filled details will be correct therefore you need to verify it before you go ahead with filing. Later on, if you get a notice you cannot make a claim that the details were pre-filled and you have not entered them.
7. Keep documentary evidences
Although you don’t have to submit any physical copy of documents to the IT department but if you receive any notice from the department, in that case the department will ask for all supporting documents such as Form 16, 16A , bank statements , investment proofs , capital gains statements , interest certificates from banks and post offices, home loan repayment schedule, etc. Therefore, you need to keep them with you for the tough days.
(Gauri Chadha is a CA and she can be reached on http://twitter.com/gauri_chadha)