01 Mar Mistakes Leading to Faulty Tax Returns: A Comprehensive Guide
Navigating the intricate terrain of income tax filing can be a daunting task, with even the smallest oversight potentially leading to significant consequences. As the deadline for filing taxes approaches, individuals find themselves in a race against time to ensure accuracy and compliance with tax regulations. However, amidst the rush to meet deadlines, common mistakes often slip through the cracks, resulting in defective tax returns and unwanted attention from tax authorities.
Utilizing Incorrect Form for Filing
According to the Income Tax Act 1961, taxpayers must use the appropriate form that corresponds to their specific circumstances. Filing using the wrong form can render the return defective, necessitating revision with the correct form within a specified timeframe. Failure to rectify this error can result in penalties and interest charges.
Failure to Report Interest Income
It is essential for individuals to disclose all sources of income, including interest earned from various accounts such as savings, fixed deposits, or recurring deposits. Neglecting to report interest income can lead to discrepancies and potential penalties. Deductions under section 80TTA can be claimed for interest earned up to RS 10,000 from savings accounts.
Non-Filing of Income Tax Return
Individuals whose exempted long-term capital gains, combined with gross total income, surpass the minimum exemption threshold are mandated by section 139(1) of the Income Tax Act 1961 to file income tax returns. Previously exempt individuals are now also obligated to file returns, closing a previous loophole.
Failure to Consolidate Income
The Income Tax Act 1961 requires individuals to aggregate income earned by their minor children, spouse, or son’s spouse with their own income for tax calculation purposes. Neglecting to include such income can lead to penalties and additional tax liabilities.
Omission of Previous Job Income
Individuals are obliged to report all income earned during the previous financial year, including earnings from prior employments if they changed jobs. Failure to disclose income from previous employment can render the return defective.
Overlooking Exempt Incomes
All sources of income for the relevant financial year must be reported, including exempt incomes, which should be listed in the Exempt Income schedule of the tax return. Taxpayers can also claim deductions on these exempt incomes.
Failure to Disclose All Bank Accounts
Since the assessment year 2015-2016, taxpayers are required to declare all bank accounts held during the relevant year, deviating from the previous practice of reporting only one account.
Neglecting to Report Deemed Rent/Expected Rent
Individuals owning properties other than self-occupied ones must report the expected rent under the “Income from House Property” section. Failure to do so can result in the return being considered defective.
Failure to Amend Reported Income
If discrepancies are detected post-filing, taxpayers must rectify them by submitting a revised return. Failure to do so can lead to penalties and interest charges on the outstanding tax amount.
By avoiding these common errors and adhering to tax regulations, individuals can ensure a smooth and hassle-free filing process, minimizing the risk of penalties and inquiries from tax authorities.
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