Income Tax Returns: Avoid these mistakes while filing ITR form

There are various ways to generate income. The most widely-generated income is salary. But beyond this, there is business income, capital gains from the sale of assets such as stocks, mutual funds, etc., income from other sources as defined in the Income Tax Act, interest income from bank and fixed deposits, and so on. It is necessary to declare all your incomes under the relevant heads in your income tax returns (ITR) forms. Not declaring your income and therefore evading taxes on such income may invite the scrutiny of the Income Tax Department.

For Assessment Year 2019-20, there are currently seven kinds of forms applicable for filing tax returns on various forms of income. They are numbered as ITR 1 to 7. ITR 1 is also known as Sahaj and is to be used by anyone with a salary income. If you have capital gains to declare, you must use ITR 2. If you have a business or professional income, you must use ITR 3. For individuals, ITR 1 to 3 may apply, whereas, for businesses, companies, trusts, associations etc., ITR 4 to 7 may apply. It is important to make sure you file via the correct form. When in doubt, read up or speak to your tax advisor.

You are filing your tax returns for the financial year 2018-19; therefore, you must educate yourself about the tax deductions available to you for that year. You are allowed to legally reduce your taxable income using the various deductions you’re eligible for under the Income Tax Act. But you must know what these deductions are and what is the limit of the deduction to be claimed. Without this knowledge, you may miss out on deductions and end up paying excess taxes.

Your tax returns may be scrutinised by the Income Tax Department. If the returns carry incorrect information, you may be penalised. Therefore, always furnish the correct information about your income, investments, and deductions availed. Do not be taken by anyone’s advice to incorrectly deflate your income or inflate your deductions. The penalty for tax evasion in this manner is 200 percent of the taxes evaded.

Form 26AS is the summary of tax deducted at source (TDS) for you. This is tax paid on your behalf by your employer, your clients, your bank, or someone else who needs to pay you. They may make TDS payments as applicable by law. However, sometimes, they may make mistakes while paying this TDS. Therefore, you must download a copy of your 26AS and assess it. Ensure that it contains TDS entries you can recognise. If not, initiate corrections.

Filing your tax returns can be a complicated process for new taxpayers. But arm yourself with information and avoid making rookie mistakes. Even if you make a mistake, it’s no calamity. You can file a corrected ITR later. As always, gather your ITR-related documents on time and complete the filing well before July 31, lest you get delayed by unforeseen events near the deadline.