Common tax filing mistakes to avoid this year

Tax filing is a yearly ritual that reports all the details about your incomes, taxes paid, liability to the tax authorities. What was earlier considered a cumbersome process has now become extremely easy and straightforward because of the online filing system. Now you can view your Form 26AS, your Annual Tax Statement and file your tax return even from your net banking login. 

When the processes have eased so much, you surely do not want to make mistakes while filing your tax returns and end up with a notice from the tax authorities. The tax filing deadline which is the 31st of July each year has been pushed to 31st of December this year because of COVID 19. 

Here are some of the common tax filing mistakes that you should avoid this year when you file your income tax return.

Using the wrong ITR

As individuals have incomes from different sources, the tax authorities come up with different Income Tax Return forms to suit the needs of different incomes. For example: If you have income from salary, other sources and income from one house property, you will have to use ITR 1. But if you have income from more than 1 house properties, you will need to use ITR 2.

So, using the right form is necessary for the tax authorities to process your returns and issue a refund (if you are eligible for one). Filing return in a wrong form may result in your return being considered invalid or even getting a notice for it. 

If you are not sure of which ITR to use, read our earlier post which could help you choose the right one.

Not meeting the tax filing deadline

It is important to meet the tax filing deadline as announced by the tax authorities each year. If you do not file your tax return on time, you may be charged a penalty or even lose claiming certain benefits.

For Example: For the Financial Year 2019-20, if you file a return beyond 31 December, you would be charged a penalty and you wouldn’t be allowed to file a return after 31 March 2021. Also, certain losses from capital gains cannot be set off against income in the subsequent years if the return is not filed on time.

The best way to ensure you don’t miss filing your return is to file your return much in advance than wait for the last moment. There may be many issues like an overload on the Tax filing website or some other issues which may make it difficult for you to file your tax returns. 

As you read this post,  you are almost more than a month away from the deadline for the current year, so instead of waiting for the last date, go ahead and complete your tax filing exercise right away.

Not declaring all income

Generally, individuals end up taking into account only income from salary or from the main profession the individual is engaged in. But often you might have income from other sources like interest from your savings account, fixed deposits, debentures, etc. You could also have other income sources like from business, consultancy, or freelancing. 

All these income sources should be taken into account and declared in your tax return. If you haven’t paid tax on these income sources, you should pay taxes on these sources at rates applicable to income slab. 

Mismatch in your tax credit figures

Your Form 26AS is the central point for all taxes deducted and paid into the government treasury by the deductor. At times, there may be a mismatch in the figures if the deductor has not paid the deducted taxes or filled in wrong figures erroneously. 

You may end up with wrong figures if you file your tax return based on other figures than the ones in the Form 26AS. When you do so, your income tax return may be considered invalid by the tax authorities. You may also get a notice for payment of taxes if your Form 26AS doesn’t reflect all the taxes paid. 

Wrongfully claimed deductions

Many expenses and investments are allowed as deductions by the Income Tax authorities under the Income Tax Act. You must make sure that the deductions that you claim are in line with the ones allowed. Also, you must claim deductions only for the amounts allowed under the Act. 

It is also necessary that you have sufficient proof for all the deductions you have claimed during your tax filing exercise. Although you may not be required to submit all proof of investment or expenses with the IT return, it is good to retain the copies for any scrutiny by tax authorities at a later date. 

In addition to these common mistakes, do not forget to link your PAN to your bank account so that if you have any refund, it is transferred to your account without any delay. 

Now that you know the mistakes you should avoid, take care while you file income tax returns this year.