Often Taxpayers while filing their Tax returns make innocent mistakes, not with the intention of evading taxes but simply out of ignorance. These mistakes though innocent may prove costly to you and invite notices from the Income Tax Department. Below are 5 such mistakes that you should avoid while filing your ITR:-
1. Not Filing your IT return on time or not filing it at all
Taxpayers many time don’t file their return when their Tax Liability is nil but their Gross Total Income is above the tax slabs. For eg, Mr. A has an income of Rs. 3,50,000 and deductions under Chapter VIA is Rs. 1,50,000/-. In this case his tax liability is nil but his Gross Total Income is more than the slab rates. The exemption from filing the Returns is only for those Individual/HUF taxpayers whose Gross Total Income does not cross the basic exemption limit. Hence, in such cases not filing the return of Income may attract penalty of Rs. 5000 under section 271F. Similarly, Delayed filing of return of Income by whatever reasons may cost you late fees up to Rs. 10,000/-. Also, if you have any loss to be carried forward to next year, you cannot do so in case of belated returns.
2. Not Disclosing exempt income or Tax Free Income
Although such income does not attract any tax liability, Such income must be reported. Income like PPF Interest, Tax free Gifts, Exempt Long term Capital Gains, etc must be reported while filing your Income Tax Return.
3. Non Disclosure of Interest Income
Many taxpayers do not disclose interest earned from a savings account or from Fixed Deposits. Any interest from savings account over and above Rs. 10,000/- is taxable. A deduction Rs. 10,000/- is allowed under section 80TTA for savings account interest. Interest earned on fixed deposits is completely taxable. Hence such income must be disclosed completely while filing your Income Tax return.
4. Claiming deductions for personal expenses while calculating Profits from Business/Profession
This is a very common mistake done by Taxpayers. Often, expenses of personal nature are debited to profit and loss account and are not added back while calculating Income from Business/profession. For example, many taxpayers claim complete deduction of depreciation on Car which is used for personal as well as business use or personal travelling expenses are shown as travelling expenses for business purpose. Such mistakes should be avoided.
5. Not Considering Income of Minor children
Many people make investments in the name of their children. The income generated from such investments must be clubbed in the income of the parents. But in most cases, taxpayers tend to overlook such income. Such Practice should be avoided.
Tax Filing is a complicated procedure and must be done carefully to avoid getting Tax Notices.
The author is a Practicing Chartered Accountant based in Pune