Every year many individual taxpayers file their Income Tax Return (ITR) and they struggle because of the complexity of rules and regulations. There are many parameters to be taken care of while filing the IT returns. Under tax laws, filing ITR is mandatory, and if not done on time and correctly, a heavy penalty can be imposed on the taxpayer. So it is important that you file your return cautiously. Before you file AY 2021-22’s ITR, here are some tips and tricks to make sure that you file a fault free ITR.
Here is a checklist of things that you should not miss –
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Remember the due date
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Don’t wait until the last minute
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Write the assessment year correctly and don’t confuse it with the financial year
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Select the right return form
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Not declaring income from capital gains
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Cross-check your bank details so that if there is any refund it should reach the right account
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Do not forget to mention all the sources of income
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Not cross-checking TDS details with Form 26AS
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Declaring incorrect email ID and mobile number
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Incorrect particulars of tax deducted and paid
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Not declaring foreign bank accounts
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Not verifying the return within the stipulated time
Apart from this you must report and calculate your tax based on all the sources of income. Missing any kind of income can result in an income tax notice or penalties.
Not reporting full-year salary in case of a job change
This financial year 2020-21, if you have switched jobs, do obtain the form-16 issued by all the employers. To file income tax return, consolidate salaries from all employers else notice from the IT department is sure to knock on your doors.
Stating incorrect residential status
Residential status refers to a person’s status with reference to how long the person stayed (physical presence) in India in the current financial year (FY) and the preceding 10 FYs. The income tax liability of a taxpayer is based on the residential status in the financial year. Taxpayers are classified into 3 categories
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A resident
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A resident not ordinarily resident (RNOR)
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A non-resident (NR)
A resident Indian needs to report all his/her foreign assets in their ITR along with income earned in India. An RNOR and NR need to pay taxes only on income earned in India.
Not stating savings account interest
For our emergency needs, we deposit a significant amount in our savings banks. Indian banks pay interest every quarter on savings bank accounts and yearly on fixed deposits. Form 16 does not have any information on this interest earned. This interest must be declared as income from other sources in IT returns. And failing to do so, the taxpayer will attract notice from the income tax department. Interest earned from all types of savings accounts needs to be declared.
Not declaring the income from dividend
As a taxpayer, you should know that the dividend income earned on stocks and mutual funds also needs to be declared in IT returns as income. Since the Finance Act, 2020, TDS is imposed on dividend distribution by companies and mutual funds and tax on dividend income earned on the same. Many miss declaring this or calculating the taxable income wrongly as it is a new law.
Hiding information on unlisted shares
Always declare details of all unlisted, private limited company stocks you own, sale and purchase transactions, and the cost of acquisition of the same in the FY. Even details of ESOPs received and shares of foreign companies you own need to be declared. These details determine your tax liability. Failing to do so, you may end up filing wrong IT returns and attract penalties.
