Income tax return filing for AY 2021-22: It is very important to file income tax return (ITR) on or before the due date with complete and accurate information about income and other information asked to fill in the ITR form. Incomplete ITR details or inaccurate information may lead to an ITR being treated as invalid or even imposition of a penalty on the assessee.
Therefore, in order to maintain the accuracy and completeness of the information asked by the Income Tax Department in the applicable ITR form, an individual should keep all the required documents handy in advance and be ready with up-to-date information. There are various essential things described below that individuals should keep in mind while filing an ITR.
Preparation for an income tax return
The process of ITR filing may become quite complex if you are not fully prepared. In this case, there may be the chance of making mistakes i.e. filing ITR with incomplete and /or inaccurate information asked by the Income Tax Department. Therefore, every assessee should be fully prepared before filing their ITR with collected relevant documents and pieces of information needed for filing ITR such as documents related to income, investment, taxes payments, prepaid taxes, Form 26AS, various certificates on which deductions would be claimed, information’s about residential status, details of related banks accounts, assets, and liabilities, etc.
An individual taxpayer should take care of the following things while filing ITR:
Clubbing Income: If any income of a minor child or spouse is clubbed in the hands of the taxpayer, then such income must be disclosed in the ITR form. Most people forgot to disclose such incomes. In those cases, they may receive a notice from the Income Tax Department.
Interest Income from Savings Account and FDs: It is very important to mention all the interest income from the savings account and FDs with bank and post office in schedule OS (Income from other sources) and then claim deduction under section 80TTA (up to Rs.10000) or 80TTB (up to Rs. 50,000 in case of senior citizen) as applicable.
Non-reporting of Exempt Income: All income earned during the previous year is required to be reported in the ITR form, notwithstanding the fact that such income is exempt from tax. There is a separate schedule for reporting tax-exempt income in the ITR form. Failure to report all income would result in receipt of a notice from the Income Tax Department.
Correct Bank Account Number: An individual taxpayer should mention the correct bank account number while filing ITR, as the refund will be credited automatically by the Income Tax Department to the account number mentioned in the ITR form. Mentioning the incorrect account number in the ITR form cannot result in a refund to a person.
Capital Gain on sale of jewellery, paintings etc: Certain personal items such as jewellery, archaeological collections, sculptures, drawings, paintings, etc. are not included in the definition of personal effects and are, therefore, treated as capital assets. Any capital gains arising from the sale of these items should be mentioned in the ITR form.
Income on which tax has been deducted: It is very important to mention all income, notwithstanding the fact that tax has already been deducted from such income at the time of receipt. It is necessary to mention the income in the ITR form along with the amount of tax that has already been deducted in the “Tax paid” sheet in the ITR form.
TDS & TCS details: It is also important to mention the tax credit details as per TDS and TCS certificates available with the assessee for claiming such tax credit in the schedule available for reporting TDS and TCS in Income Tax Return Form and verify with Form 26AS details.
Deduction for Investment claim under 80C, 80CCC, and 80CCD: It is very important to claim a deduction based on investment during the years in Section 80C, 80CCC, and 80CCD. For example, interest on NSC will be first added to Schedule OS and then it can be claimed for deduction under Section 80C, however, the deduction is available within the maximum limit of Rs 150000 as mentioned in Section 80E.
Deduction for payment claim under 80D and 80DDB etc: If any deduction is available on a payment basis, the assessee should not forget to claim these deductions like deduction under Section 80D and 80DDB, etc.
Other important points which are mostly left out mistakenly by taxpayers while filing ITR:
Selection of appropriate ITR Form: There are basically 4 ITR forms which are applicable for individuals i.e. ITR 1 to ITR 4. Selection of an appropriate ITR form is important as wrong selection will result in the defective notice from the Income Tax Department, which needs to be rectified within a specified period of time. The applicability of the ITR form is as follows:
ITR-1 – For a Resident Individual having total income up to Rs 50 lakh in the nature of Salary, One house property, Other sources, and agriculture income up to Rs 5000.
ITR-2 – For Individual and HUF not having income from business or profession.
ITR-3 – For Individual and HUF having income from business or profession.
ITR-4 – For Individuals, HUF, and Firm (other than LLP) being resident having total income up to Rs 50 lakh in the nature of Salary, One house property, Other sources, agriculture income up to Rs 5000 and presumptive income u/s 44AD, 44ADA, and 44AE.
Failure to reconcile Income and TDS with Form 26AS: All taxes paid during the previous year in the form of TDS, TCS, Advance Tax, and Self-Assessment Tax should be reconciled with Form 26AS. If the payment of taxes as mentioned in the ITR Form exceeds the amount indicated in Form 26AS, it will result in either a demand notice or less refund from the Income Tax Department.
E-verification of ITR: After filling the ITR form it should be e-verified at the same time or later i.e. within 120 days of the filing of ITR. If the taxpayer is not able to e-verify the ITR form, then the signed copy of ITR-V should be sent to CPC, Bangalore within 120 days of the filing of ITR.
(By Kapil Rana, Founder and Chairman of HostBooks Limited)