• Jul
  • 24
  • 2009

Mistakes people commit generally in filing income tax return

Wrong selection of ITR :-

One may sorely miss the old ‘one size fits all’ SARAL forms for the sheer ease and convenience of filling up the one page return, but they were not e-friendly. It was also cumbersome to attach a whole lot of supporting documents and spend a day away from the office waiting in the queue outside Tax Department to file the return. The new ITR series forms, though, lengthy are designed for uniform structure of data, which facilitates speedier processing of the refund claims. They are not required to be supported by any annexures (including TDS certificates) . The biggest advantage of the new forms is that now one need not wait in queue outside the Tax Department but, can e-file the returns from the comfort of his office or home and yes, for those who prefer to burn the midnight oil, it is possible to upload the returns even at midnight.

Rahul mentions he filled up ITR-2 since, he has house property income and short term capital gains income (but no business income) in addition to salary and interest income. However, if one has only salary and interest income, the correct form is ITR-1. Rahul’s friend Sachin has income from freelancing and trading in computer parts (i.e business income). He would need to fill up ITR-4, which is the form applicable for individuals and HUFs having business income from proprietary business or profession.

Acknowledgement of return

For tech savvy people like Rahul who file their returns on-line, the process has been made even simpler. As per the new procedure, even those who have uploaded the e-return without digital signature the need to visit Tax Department has been eliminated.

Until last year, signed hard copies of acknowledgements (ITR V) of e-returns filed without digital signature were required to be submitted to the Tax Department to validate the e-returns. However, in the current year, the acknowledgements need to be sent by ordinary post (not by courier or speed post) to Centralised Processing Centre at Bengaluru. However, one should make it a point to post the signed acknowledgements within thirty days of uploading the return lest your e-return is treated as invalid.

But how does then one know whether his e-return has been validated? Rahul explains that the receipt will be confirmed over an e-mail and can also be checked from e-filing website. This eliminates the need to carefully preserve the hard copy.

For those who have doubts on the new technology and have the advantage of ample time in hand, option of filing hard copy of the ITR form is still open.

Non Disclosure of Information Required in ITR as per AIR

Rahul points out that there is an innocuous looking column in the ITR series forms captioned ‘Other Information (transactions reported through Annual Information Return)’. This column requires data of significant investments made during the year, transactions of immoveable property, cash deposits and credit card expenses aggregating or exceeding the amounts mentioned in the table below :

  • Particulars Nature of transaction Amount
  • Investments IPO of shares Rs. 1 lakh
  • Units of mutual fund Rs. 2 lakhs
  • Bonds or debentures issued by a company/institution or RBI Rs. 5 lakhs
  • Immoveable property Purchase or sale of immoveable property Rs. 30 lakhs
  • Cash deposit Cash deposit in single savings bank account Rs. 10 lakhs
  • Expenses Credit card expenses on a single credit card Rs. 2 lakhs

by secondary sources like banks, mutual funds, IPO issuing companies, RBI and Registrar of Properties and matches it with data filed by taxpayers to keep a tab on the movement of capital. Unreconciled data leads to in-depth investigation by the Tax Department and helps them dig out unaccounted money.

Filling up the AIR data correctly and completely ensures that your meeting with your Assessing Officer (in case your return is picked up for scrutiny) is free of any embarrassment and discomforting questions.

Salaried people normally do not disclose income other then salary :-

A very common mistake, while filling up returns in a rush to meet the deadline is non-disclosure of incomes other than salary – cautious Rahul, makes it a point to prepare a summary of all his bank accounts before filling up the return. Apart from savings bank interest, there may be house property income, accrued interest on Fixed Deposits, Bonds and debentures, National Savings Certificates, long term or short term capital gains and the like. While, claiming credit for tax deducted on such accrued incomes or claiming 80C deduction for NSC accrued interest, care should be taken to include the corresponding incomes also in the Total Income.

Taxable incomes earned on investments made in the minor child’s name is another aspect that people miss-out on. Under the clubbing provisions of income tax, minor’s income is required to be included in the income of the parent whose income is higher. Further, monetary gifts received from non-relatives are also taxable, if they exceed Rs. 50,000/- in the aggregate during the year.

Missing out on disclosing such incomes may expose the taxpayer to adverse action by the Tax Department by way of recovery of tax with interest and penalty all of which put together may even exceed the undisclosed income.

Business Loss Can not be set off against Salary Income :-

Rahul’s friend Sachin burnt his fingers in trading in computer parts, while, working as hardware engineer in a company. He was wondering whether the business loss can be set off against his salary income. Unfortunately, under the set off provisions of income tax, business loss cannot be set off against salary income. However, such loss can be set off against capital gains or income from other sources of the same year. Further, if any part of such loss remains unabsorbed, it can be carried forward to future years (not more than eight years) for set off against business income in those years.

The provisions in respect of capital loss are more stringent and do not permit set off in current year against income under any other head (except capital gains). Carry forward for eight years is, however, possible for set off against income under same head.

Interest on Housing Loan and principle amount  Paid during Construction Period:-

Sachin had booked a flat in an under construction building by availing a housing loan from a bank. He was expecting possession of the flat during the year. Unfortunately, as the real estate prices started crashing, the builder defaulted on his commitment and Sachin is yet to get the possession of the flat. Meanwhile, he is repaying the loan in monthly installments to the bank. Ordinarily, interest paid for acquisition or construction of house is allowed as deduction from income from house property subject to limit of Rs. 1,50,000 in case of self-occupied property. Sachin wonders whether he can take the benefit of interest deduction by offering some nominal notional value of property under construction. Unfortunately, the income tax law does not permit him to do so. But, the silver lining is that the interest payable upto the financial year prior to year of acquisition can be accumulated and amortised deduction can be claimed over five years starting from the year of acquisition.

Consequences of  Error in ITR :-

Its only humane to err.  Often some mistakes are discovered after filing of the return. Does it mean exposure to adverse consequences under income tax law? Relax. Income tax provisions do recognise this and permit filing of a revised return, if some errors are noticed subsequent to filing of the return. The revised return can be filed before the expiry of 21 Months from the end of relevant financial year i.e. revised return for F.Y. 2008-09 can be filed till 31st December 2010.

While, there cannot be an exhaustive list of common mistakes while filing return, the above may provide some useful guidance to an individual taxpayer.


28 Responses to “Mistakes people commit generally in filing income tax return”

  1. Vinod Maralad says:

    If you have wrongly uploaded your Income tax return then no need to worry ,you can still correct your return . As per CPC guidelines if you have wrongly uploaded your return then you can revise it.

    ANSWER:

    The process of filing a Revised Return is the same as filing an Original Return. The ONLY difference is that in the Excel utility (Return Preparing Software), you need to select the ‘Revised’ return option and provide the Original e-Filing Acknowledgement number and Date of filing the Original return. Further, the assessee is required to select the section of return filing as u/s 139(5).

    First you have to fill excel utility with all data ., if you have already saved the previous excel file then Just make the correction in the file where ever required .select revised return as suggested above

    Generate the XML and upload it the efiling site again

    download the ITR-V and send to CPC in 120 days from date of upload.

  2. GOPINATH K says:

    Sir,

    I am wrongly submitted form ITR4 instead of submitting ITR2 what i have to do.

  3. ashish says:

    sir, for a.y.12-13 i filed return on form 4 s , i am doing printing job work.now i got a notice fro m deptt.u/s 142. what are the remidies before me and what deptt can do. i have also claimed refund.

  4. Sumit Saxena says:

    I have filed my ITR for AY 2013-14, but in ITR V, my surname is misspelled there. Is it necessary to correct it and send the revised return? I don’t have to get IT refund. Please suggest.

  5. Apoorve Agarwal says:

    Hi,
    While filling ITR 1 for the AY 2012-13 I mistakenly entered amount 0 in the section 80C. I have uploaded the xml file on the website. Kindly enlighten me the procedure to correct it.

  6. P. Arora says:

    If I have committed any mistake in my original return, am I permitted to file a corrected return after due date?

  7. Chaitanya Modi says:

    Dear sir,

    I have filled e-return form. In which by mistake I have filled my TDS in Advance Tax section. Now, CPC has send letter to take necessary action.

    Please guide.

    Regards,
    Chaitanya Modi

  8. Paros Mohan says:

    Hi Sandeep Sir,

    By mistake I have have submitted wrong information in ITR for year 2007-2008 and because of that wrong information I got the demand letter from IT department now.

    Suggest what we should do now.

  9. vishal walde says:

    Dear Sir,

    I am a salaried person under taxable limits.

    I had submitted a manual return for AY 2010-11. Later on in the year I had to file return for AY 2011-12 but wrongly filed for AY 2010-11 again which I filed online. This mistake i have realised now when I wanted to file for AY 2012-13 ( FY 2011-12) Kindly advise how should I rectify the mistake and proceed.

  10. Raja says:

    Dear Sir,
    I have generated XML and uploaded it in income tax web.Got the ITR V also.But there is a typo in my last name.Missed out one letter.
    I didnt send the ITR V to the income tax dept yet.
    Now can i correct it in excel and generate xml again,re-submit it?

  11. Nagendra says:

    your first para says that one has to fill ITR-1 in case of only salary and interest income.

    But as per the income tax website it shows that if we have Income/Loss from House Property we have to select ITR-2.

    Please clarify on this.

  12. Vasantharaju S. G says:

    Dear sir/madam
    I filed income tax through online on 16-07-2011. (E-filing Ack No. 235482460160711). In filing, I made one mistake and the mistake is that the gross total income was wrongly entered (amount entered without deducting the professional tax. ie., instead of Rs 622862/- I entered Rs. 625262/-) Can I refile once again if I can what is the procedure pl let me know.
    Thanking You
    Your Faithfully

  13. dimpi says:

    how much long term capital gain exempt & in ITR form where it should mention & from which section it exempted .

  14. ANKIT says:

    CAN CAPITAL GAIN LOSSES OF PREVIOUS YEARS BE SET OFF AGAINST CURRENT YEARS LOSS IF THERE IS LATE FILLING OD INCONE TAX RETURN

  15. SANDEEP BANSAL says:

    DEAR SIR , IF IT RETURN IS LATE , WHAT ABT LOSSES WHICH ARE C/F UPTO LAST YEAR ……WILL THEY BE ALLOWED TO BE SET OFF AGINST CURRENT YEAR PROFIT OR NOT

  16. ashok dawar says:

    I had deposited my ITR1 for the assessment year 2010-11 on 12,7,2010. By mistake i forgot to calculate short term capital gain tax. Can I deposit the short terms capital gain tax in challan as self assessment tax. How can income tax department know that I have deposited the same. Whether i have to deposit another return or not or simply deposit the challan by giving my pan numer. please clarify. A
    Ashok Dawar
    13.7.2010

  17. SURESH says:

    Dear Sir,

    My self and my wife both are INCOME TAX Payers. I have already paid the income tax for the year, Insetad of paying tax on my wife name, it was mistake that once again it was paid on my name. So how to settle this ?

  18. K.ASWATHA REDDY says:

    Sir,
    Make it automatic that the system generates acknowledgement as the present method expects the assessee to enter the password to generate the acknwledgement.After uploading the file looks very strange but not in the format in which we enter the data.At this stage taking ack requires the ack.number of the original return which is not possible to know without the ack.
    regards
    aswath

  19. ITR 4 as commission is business Income.

  20. Sunil says:

    If I am salaried person and having regular employee of the public ltd company but my salary is not taxable but I have other source of Income i.e. Income from commission from Pegmy Collection in which they have deducted TDS from commission so, that which ITR form should I file while submitting return.

  21. Murthy says:

    Dear Sir,
    Thank you very much for providing much needed and useful information. I have two questions:
    1. While filing the returns, this time I have made a mistake of entering wrong amount under TDS. This happened because while filling the form I entered the same TDS amount twice under ‘TDS’ and under ‘Tax paid by employer’. Because of this the final form shows like the IT Dept has to refund the extra amount deposited by the employer. But by the time I realized my mistake, it was too late. Now I would like to know the consequences and options left for me.
    2. I am salaried person and paying the tax for the past 3 years through TDS. Unfortunately, I did not know about the importance of filing IT returns, which I have done for the first time, this year. Now my question is, do I need to file for the previous years? What happens if I did not file? If I file now, am I eligible to refunds, if there are any?

  22. Anayanmol says:

    I uploaded the XML file for IT return and received ITR-V.
    When I reviewed ITR-V, I found that the name in the VERIFICATION section of the PDF file is truncated.
    My name contains total 28 characters but the ITR-V file contains first 24 characters only. (When I hover on name in softcopy of PDF, then I can see all 28 characters. The last 4 characters got overwritten. )
    I filed the same information last year and the ITR-V was created properly.
    This year they included PAN information in ITR-V, so the space allocated for name is not enough to include all the characters.
    Do I need to correct ITR-V manually, sign it and send it to Banglore IT office.
    Or I need to file revised return form only and (should not send this incorrect ITR-V)

  23. Alex G says:

    Very encouraging and helpful to all taxpayers.

  24. bhattadln says:

    in itr as per air u said single savings account is it correct

  25. jayantD Kalpavriksha says:

    I have filed my return of Income somewhere in June 2009 and I have sent the ITR V by courier as till 12.07.2009 there was no such conditions as I given to understand. But the Bangalore office has not accepted the same and returned the courier. By the time the courier fellow delivered the courier back one month is over. I have been told that I have to resubmit the return. When I go to resubmit the return it is not been accepted. I got the message that you have already filed the return and now you have to file the revised return. But my original return itself treated as not filed how can I file the revise return. Please advise what should be done in this case.

  26. DEEPAK CHANG says:

    i am very thankful for your mails they are informative and very useful.

  27. Dear Sir,
    Thanks a lot for the concern. These words are actually advertisement which are shown on the basis of keywords in article. So be sure no hack of the site.

  28. Muraleedharan says:

    Your mailings are helpful. I notice some words (shown in red, underlined) in the articles are linked to websites like shaadi.com, monster.com, etc. You may like to see if the site is being hacked.

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