Points to be Kept in Mind before filing Income Tax Return

As we all are aware that the return filing season for AY 2020-21 has been started. Now everyone are geared up for filing there Income Tax Return on time. Hence today I am writing this article to mentioned some important points which we all need to keep in mind at the time of filing the returns.

Selection of Return Form to be Used

The first step in filing of a tax return is to select the correct Form of return. There are seven Forms of return notified by the tax authorities. Out of these, ITR 1 to 4  are applicable to individuals/HUFs, while ITR 5 is for Partnership Firms and LLP, ITR 6 is for Companies other than those claiming exemptions (See Rule 12) and ITR 7 is for  [For persons including companies required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D (Please see rule 12 of the Income-tax Rules).  Therefore, correct form needs to be filled in.

Common Mistakes While Filing the Return Form

1. Interest from bank deposits or NSC certificates should be disclosed

Even though the deduction for interest incomes was withdrawn three years back, many people still do not disclose the interest which they may have earned from their bank deposits or NSC certificates. No matter how small the amount is, such interest should be disclosed in the return. One should not make the mistake of skipping the interest income altogether on the basis that it is not shown in Form 16, as in many cases, the employer may have not at all considered the interest income for computing the TDS of the employee. In respect of Interest on Saving Bank Account Assessee can claim deduction Under Section 80TTA.

2. Deduction for investment made under 80C, 80CCC & 80 CCD is restricted to Rs 1.50 lakh

Further, it should be noted that deduction for investment made under Section 80C, contribution to pension fund under Section 80CCC or for contribution to pension scheme of the employer under Section 80CCD is restricted to an overall limit of Rs 1.50 lakh. Benefit under Section 80C can also be claimed for tuition fees paid by an individual for their children and for the repayment of principal amount in respect of home loan taken by him.

3. Income of spouse or minor child may have to be clubbed with the income of taxpayer

There can also be cases where the income of spouse or minor child of the taxpayer may be liable to be clubbed with the income of the taxpayer as per provisions of tax laws. In such a scenario, it is pertinent that the correct Form of return is used to file the return of income.

4. Be cautious while calculating surcharge and cess

It is common to make a mistake while calculating the amount of surcharge and education cess on the amount of tax payable. It needs to be noted that surcharge of 10% is not required to be added to the tax if the total income does not exceed Rs 100 lakh. However, cess should be added to the amount of tax at the rate of 4% even if the total income is less than Rs 100 lakh. The correct method is to first add surcharge of 10% to the tax, if it is applicable, and thereafter, add cess at the rate of 4% on such aggregate of tax and surcharge.

5. Safely file all relevant documents for future needs

Though the requirement to attach various certificates, documents, etc., along with the return has been dispensed with, one should not commit the mistake of trashing away such documents on the premise that these would not be required in the future. The tax authorities might require any document to be furnished by the taxpayer in case a scrutiny proceeding is initiated for verifying the claims made in the return.

6. Double check all key information like PAN No., bank account details, communication address etc

Some taxpayers may commit error in quoting the correct Permanent Account Number (“PAN”). The correct 10 digit PAN should be filled in legibly. Appropriate care is required while filling in the address as all the notices and other communication from the tax authorities is posted to this address.

In case of a refund, the bank account number needs to be filled in accurately. In case the refund is opted to be received via ECS direct into the bank account, adequate care should be taken to correctly fill in the MICR code. Any mistake may lead to problems in credit of tax refund and consequent inconvenience.

Precautions while Filing The Return

1. File the return in time

Taxpayers often tend to wait too close till the last day to file the return. This often leads to a lot of inconvenience. And even if, in order to avoid the long queues at the counters receiving the paper returns, a taxpayer plans to file the return online, filing very close to the last day is not advisable given the fact that peak load on the servers of the e-filing website during the last few days may make the whole online filing experience quiet frustrating. If the clock on the last day ticks beyond 12 at midnight, any return filed thereafter would be treated as having been filed on the next day.

Filing return after the due date may prove to be a costly mistake for a taxpayer who has incurred losses which he wants to carry-forward to future years (e.g., house property loss, short-term capital loss, long-term capital loss, etc.). Under the tax laws, such losses are not allowed to be carried forward for being set-off against the income of future years unless the return has been filed by the due date even though all the taxes have been pre-paid. Mostly, the taxpayers filing a loss return for the first time commit this mistake.

Please note that, the due date for the filing of Income tax Return for AY 2020-21 has been extended till 30^th November, 2020 due to COVID-19 pandemic situation.

2. Online filing of returns

Many taxpayers, opting to file their return online, are of the perception that having filed the return online without a digital signature, submission of Form ITR-V is a mere formality which can be completed anytime. This is a misconception. If the return is filed online without digital signature,  A duly verified ITR-V form should be signed and submitted to CPC, Post Bag No. 1, Electronic City Post Office, Bangalore – 560100 by Ordinary Post or Speed Post (without Acknowledgment) ONLY, within 120 days from the date of e-Filing. If Form ITR-V is filed beyond 120 days, it would be deemed as if the return was not filed online in the first place and it might be too late by then.

Similarly, if a paper return is filed, the acknowledgement slip should be preserved carefully.

3. Key rules to be followed to ensure trouble free processing

Thus, a little extra precaution on the part of taxpayers can help them avoid committing mistakes while filing of the tax return and keep them away from taxman.

Disclaimer: The contents of this article are for information purposes only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

(Republished with Amendments by Team Taxguru)