1. Income Tax efiling: Some key points you must not ignore

Income Tax efiling: Some key points you must not ignore

The Income-tax Return (ITR) filing forms have been overhauled and additional reporting requirements have been introduced.

Updated: July 27, 2017 4:20 PM
Income Tax efiling, ITR filing, ITR filing news, Income Tax efiling news, Income Tax efiling date, Income Tax efiling last date, Income-tax Return, ITR filing, Income-tax Act, latest news, latest tax news, india news ITR filing is an annual ritual in which the income earned during the year and tax thereon need to be reported. (PTI)

By Puneet Gupta

In the past few years, the Government of India has taken various transformational reforms to move progressively towards digitization and automation. The main aim of the government has been to focus on transparency and bring in an era of greater tax compliance. With an objective to broaden the tax base, the Income-tax Return (ITR) filing forms have been overhauled and additional reporting requirements have been introduced.

ITR filing is an annual ritual in which the income earned during the year and tax thereon need to be reported. Every person having taxable income exceeding the exemption limit before claiming deductions under Chapter VI-A of the Income-tax Act, 1961 (Act) is required to file the ITR.

Below are some of the key points to be considered while filing ITR:

1. Confusion between Financial Year and Assessment Year

Individuals are usually unclear on the difference between the financial year (FY) and the assessment year (AY). In India, tax is levied on the annual income earned during the FY. The year in which income is earned is called the FY and the year following the FY, in which such income is assessed to tax, is called the AY.

For example, for the income earned during the period 1 Apr 2016 to 31 Mar 2017, 2016-17 will be referred to as the FY and the following year i.e. 2017-18 will be referred to as the AY.

For an individual with salary, house property and other income, the due date to file the ITR for the FY 2016-17 is 31 Jul 2017.

2. Misconceptions and common mistakes

(i) Reporting of Exempt Income

Income such as dividend on listed shares, dividend on mutual funds, long-term capital gains on sale of listed equity shares or units of equity-oriented mutual funds, interest on Public Provident Fund accounts, etc. are exempt from tax.

Individuals generally miss reporting such income in the ITR assuming that since such income is not chargeable to tax, there is no requirement to report the same. However, exempt income is also required to be reported under a specific schedule in the ITR form.

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(ii) Bank accounts and Interest Income

It is a common perception among individuals that it is enough to report only one bank account in the ITR. However, it is mandatory to provide details of all savings and current bank accounts operational anytime during the FY in the ITR.

Incorrect reporting of bank account details such as incorrect bank account number or IFSC code may result in non-delivery of the eligible tax refund. Thus, tax payers should make sure to provide correct bank account details to claim eligible tax refund smoothly.

Individuals may also skip to report the interest earned from the bank accounts assuming it to be tax free or because tax has already been deducted at source.

Interest earned from savings bank account, fixed deposits and recurring deposits is fully taxable. However, Section 80TTA of the Act allows deduction upto Rs 10,000 for the interest income from all savings bank account earned during the year. Thus, even where interest income is less than Rs 10,000, the interest income needs to be reported as taxable income and deduction under Section 80TTA should be claimed in the ITR.

Similarly, interest earned by a non-resident from Non Resident Ordinary (NRO) account is taxable. However, interest from Non-resident External (NRE) account earned by a non-resident is fully exempt from tax.

Also, interest income from fixed deposit, recurring deposit, NRO is subject to TDS provisions and tax is deducted at source at applicable rates.

For example, bank deducted TDS @ 10% on interest income on fixed deposits held by resident individual. However, the interest income is taxable in the hands of individual at applicable slab rate. Thus, the individual may need to pay the balance tax as advance tax or self-assessment tax before filing the ITR.

(iii) Rental income from deemed let out property

Some individuals disclose only the actual rental income from house property but may miss to report the deemed income from their vacant house in case they own more than one house property.

Under the provisions of the Act, in such a case, any one property is treated as self-occupied and its annual value is considered as nil. The other house property is deemed to be let-out and the expected rent is treated as income (gross annual value).

A standard deduction of 30% of the net annual value (gross annual value less municipal tax paid during the year) and a deduction for actual interest paid on the housing loan taken in respect of that property can be claimed.

For example, an individual has 3 house properties out of which only one is let out. In such case, the individual will need to offer actual rent on the let out property (assuming the same is not less than the market rent) and market rent on any one of other two properties to tax. The individual will be allowed deduction for 30% of the annual value of both houses and for interest paid on housing loan if any.

A point to note here is that under-construction property is not considered as a house property for tax purposes.

3. Verification with Annual tax statement (Form 26AS)

Form 26AS is a good starting point for ITR preparation. Form 26AS shows the various heads of income on which tax is deducted at source by the payer of income – it has record of both the income and the tax deducted at source on such income.

This document must be checked before filing the ITR to cross verify the tax deducted details. It also contains the details of any advance tax or self-assessment tax paid or any income tax refund received from the tax department during the relevant FY.

Additionally, Form 26AS reflects the details mentioned in the Statement of Financial Transaction (SFT) – earlier called as Annual Information Return (AIR). SFT is filed by different entities stating the details of specific transactions such as high value investments, credit card expenses, cash deposits and purchase or sale of immovable property, etc.

Any mismatch between the ITR and Form 26AS may lead to further inquiry from Income-Tax Department. Therefore, it is necessary to check the details from Form 26AS before filing the ITR.

Further, it is important to make a few last-minute checks before filing the ITR, such as – correspondence address, phone number and email ID so that the department can send updates relating to tax demand, refund, etc.

(The author is senior tax professional, EY India. Views expressed are personal.)

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  1. B
    Bala Gupta
    Jul 10, 2017 at 11:46 pm
    If a person is having commercial property self occupied and not doing any business then what is the rule of income tax on it.
    1. A
      Anil Prakash Sharma
      Jul 9, 2017 at 6:30 pm
      Sir , while filing the itr i have commeted the mistake in . I have mentioned the TDS Rs 6603 in place Rs 7275. Please tell how to correct the mistake .
      1. n
        Jul 22, 2017 at 4:42 pm
        dear sir just go to incometax department's efiling site and resubmit a revised return for the same financial year / quarter or whatever the case is.
      2. B
        Bidhan Bera
        Jul 9, 2017 at 3:26 pm
        My office denied to give form 16 in F.Y15-16.l filed return as tds deducted by office,but as per 26 AS there is still due tax . A no tice in my adress is send by I.T. for forcorrection what I have to do?
        1. C
          Charudatta Desai
          Jul 9, 2017 at 11:49 am
          It's very good information to most of people about income tax. Thanks and hopefully expecting in future good information from you.
          1. K
            K. V. Murali gupta
            Jul 9, 2017 at 9:41 am
            Shall we file of AY of2014-15
            1. K
              K. V. Murali gupta
              Jul 9, 2017 at 9:40 am
              It is good but for govt. employees which form is to be used for e returns..... Or e filing.
              1. Ap Rosario
                Jul 9, 2017 at 12:49 am
                Is there is any update on income tax regarding in 2017 GST new plan. If is there is any possible let me inform me.
                1. kishore Kumar
                  Jul 9, 2017 at 12:26 am
                  I. T .office ko order dena chahia ke sabhi governments servants ko 16 no form office compulsory de
                  1. kishore Kumar
                    Jul 9, 2017 at 12:20 am
                    Office not given from16 I am government servant
                    1. Sumer Jain
                      Jul 8, 2017 at 9:11 pm
                      Nice coverage on ITR
                      1. S
                        Jul 8, 2017 at 8:53 pm
                        You could have provided section details like where to show interest income ..Where to claim deductions.. how to calculate gross ry n taxable ry.
                        1. C
                          Jul 8, 2017 at 8:42 pm
                          Is interest earned on SBI SAVING PLUS ACCOUNT taxable, if interest is below 10k.? Please clarify it.
                          1. P
                            Pn mathur
                            Jul 8, 2017 at 8:28 pm
                            I am retired in June 2016, the income from ry shown for three months .Rest 9 months I got pension which is not shown in form 16 issued BT employer. Whether I have to show pension received by me in other income column. IInd kindly let us know whether the income tax relief is given on iind housing loan for different house at other place. First housing loan is completed. III what is the last date for submission of ITR. With regard Pn mathur
                            1. Balaraman Thoppe
                              Jul 8, 2017 at 7:52 pm
                              Very useful information regarding f.y and a.y besides other details.Thanks.
                              1. S
                                Salma Begum
                                Jul 8, 2017 at 7:10 pm
                                Let me know if we can claim interest rebate on our second home loan. Further can we claim Interest rebate on education loan for 8 or more years How to express expediate the refund process
                                1. H
                                  H N Ray
                                  Jul 8, 2017 at 7:02 pm
                                  Excellent information, pl put regularly such information, so that more people will came to know more about their income and taxation.
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