Common mistakes in filling up Income Tax Return form that result in reduction of refund or additional tax demand during processing by the Income Tax Department
A. Reasons for mistakes in calculation of Income:- The accurate and complete filling up of the relevant column or detail in the Income Tax Return (ITR) form is most crucial for correct calculation of income by the Income Tax Department. As a general principle during processing, in case of any inconsistency between the values as entered in the Schedules and the cross-referenced values in other Schedules or Totals / Summary in PART B-TI,
In case of e-returns using Department software these inconsistencies will not arise. However, if you are using other commercially available software for return preparation, please contact the software provider in case of such inconsistencies.
In case the computation of Income or refund is different than what had been entered or what is expected, please verify the accuracy of the data entered by you in the ITR. Except for limited number of complicated tax returns, for most taxpayers, the simple check points are the following:
a. Salary from all employers, irrespective of whether Form 16 has been issued or not, should be entered in Item 1 of ITR 1 or details in Schedule Salary in ITR 2.
b. Interest income from fixed deposits, savings bank account etc should be entered in Item 2b of ITR 1 or Item 1b of Schedule OS-Income from Other Sources in ITR 2. The total in Item 2c of ITR 1 and intermediate totals in Items 1e, 1g, and 3 of Schedule OS-Income from Other Sources in ITR 2 should be correctly entered.
c. House Property Income should be entered in Item 1a, Municipal taxes paid should be entered in Item 1c and the intermediate total should be entered in Item 1e of Schedule HP-Income from House Property in ITR 2.
d. Income from Short Term Capital Gains should be entered in Item A of Schedule CG-Capital Gains in ITR 2.
e. Income from Long Term Capital Gains should be entered in Item B of Schedule CG-Capital Gains in ITR 2.
f. Adjustment of current year and brought forward losses- Schedules
CYLA, BFLA and CFL
Most taxpayers have left these Schedules completely blank. These schedules are used for permissible adjustment of current year loss of one type of income against another type of income and is available only in ITR 2. The main checkpoints are:
g. Income chargeable to Income tax at special rates– Schedule SI
Most mistakes have occurred in this Schedule since taxpayers have not correctly filled the codes, rates or values. The following points may be considered:
i. STCG under 111A is ‘1A’ and the tax rate is 10%.
ii. LTCG in case of ‘Asset in the case of others where proviso under section 112(1) not exercised’ where benefit of indexation is allowed is ‘21’ and the tax rate is 20%.
iii. LTCG in case of ‘Asset in the case of others where proviso under section 112(1) is exercised’ where the benefit of indexation is NOT allowed is ‘22’ and the tax rate is 10%.
iv. Winnings from Lottery is ‘5BB’ and the tax rate is 30%.
h. Deductions from Income under Chapter VIA
Most mistakes have occurred due to incomplete details or leaving blank of value of deduction claim in ITR 1 or in the Schedule VIA in ITR 2. In most cases only the total deduction value is mentioned.
B. Reasons for difference in calculation of Tax or Interest under 234A, B or C and Interest on Refund.
There may be a difference in calculation of tax or interest due to the following reasons:
a. Mistakes in computation of Income as mentioned above leading to an increase in Income.
b. Mistake in correctly entering data or code of Income chargeable to tax at special rates such as STCG on sale of shares, LTCG where indexation benefit is claimed, winnings from lottery.
c. Incorrectly computing special rates of tax
d. Mistakes in entering or leaving blank, important fields relevant for computation of tax such as date of birth (relevant for senior citizens) or gender (relevant for female taxpayers), resident or non-resident, status (relevant in case of HUF).
e. In case of any shortfall of tax payment either due to non-payment or due to non-matching of the tax payment or TDS, interest may be charged. Typically, interest till the date of processing under 234A is charged if the return is filed beyond due date, interest under 234B is charged for shortfall in payment of advance tax and interest under 234C is charged for deferment of advance tax.
f. Interest under 234C is also charged in case advance tax on account of STCG under 111A, LTCG or Winnings from lotteries is not paid, beginning from the next quarter from the quarter in which the income is earned.
g. Details of quarterwise breakup of STCG, LTCG and Winnings from Lottery as mentioned in Schedule SI after adjustment of Losses and adjustment of basic exemption threshold, if applicable, are used for calculation of advance tax liability and interest under 234C.
h. The period for which interest under 244A is calculated on refund of tax is reduced by the period of delay in filing of return.
C. Reasons for mistakes in Credit for tax payments or TDS
A major reason for difference in refund amount during processing is that the details of tax payment or TDS do not match the data available with the Department. The critical checkpoints are as under:
a. Corresponding deduction of tax (TDS) on salary by all Employers should be correctly entered in Item 21- Tax Deducted at Source from Salary in ITR 1 or in Schedule TDS 1 for ITR 2.
b. The total of all TDS from all employers should be entered in Item 15b of ITR 1 or in Item 9b of Schedule Part B TTI- Computation of tax liability on total income of ITR 2.
c. Corresponding deduction of tax (TDS) on Interest by all Banks should be correctly entered in Item 22- Tax Deducted at Source on Interest in ITR 1 or in Schedule TDS 2 for ITR 2.
d. The total of all TDS from all Banks should be added to Item 15b of ITR 1 or to Item 9b of Schedule Part B TTI- Computation of tax liability on total income of ITR 2.
e. TDS on salary should be entered in Schedule TDS1 ONLY and TDS on other Income should be entered in Schedule TDS 2 ONLY.
f. Tax deduction Account Number (TAN) of the Employer or Bank is the unique identifier for matching TDS claims made against TDS reported by Employers or Banks. The TAN number is mentioned on the Form 16 given by the Employer or on the Form 16A given by the Bank. In case the TAN of the Employer or Bank is not correctly mentioned, no matching is possible and TDS credit will not be given. The correct structure of TAN is mentioned below:
|B L R||W||3 9 5 6 7||H|
|RCC Code : Bangalor||First
|Numeric (5 places)||Alphabet|
g. If the TAN has been correctly entered but the Employer or Bank does not report the same TDS details to the Department, especially the taxpayer Permanent Account Number (PAN), then also the TDS cannot be matched. The taxpayer should confirm from the Employer or Bank that TDS details have been reported to the Department.
h. In case of Tax payments of Advance tax or Self Assessment tax, the PAN used to submit the tax challan to the bank should be the same as the PAN used to submit the return. Without a valid PAN the tax payment received from the bank would be in suspense and cannot be matched with tax payment claim as entered in the return.
i. While making the tax payment at the Bank, NO MISTAKE should be made in the challan while entering the PAN, Name, Type of tax payment (advance tax (code 100), self assessment tax (code 300)), tax applicable (Income tax other than companies).
j. Any tax payment made under code 400 corresponding to ‘Tax on regular Assessment’ cannot be used for matching and accordingly credit cannot be given against advance tax or self assessment tax claims.
k. The Challan Identification Number (CIN) is the combination of BSR code (any bank branch’s unique 7 digit identification number issued by RBI), date of deposit of challan (DD-MM-YY), and the running serial number of the challan, and is mentioned by the Bank while accepting tax payment on its seal. In case this is not clearly legible, the Bank can be requested to provide correct details. This must be entered correctly in the return while claiming credit.
D. Miscellaneous mistakes
Mistakes in address etc do not affect processing but cause mis-delivery or non-delivery of communication or in case of Bank Account error cause rejection of refund credit to taxpayer account. The following points may be noted:
a. The name in the return should be entered as it appears in the PAN card, to the extent possible.
b. Address should be correctly filled with correct city, state and PINCODE for faster and accurate delivery of communication from the Department.
c. For faster credit of Income Tax refunds, correct bank account number and MICR code in the return should be mentioned. In case of any mistake in MICR or Bank Account number, the refund will not be credited. and a cancelled cheque showing correct particulars would be required to be submitted to CPC for correction in bank account number or MICR code.
d. In case of Refunds below Rs 100, no refund is issued and if Demand is below Rs 100, it need not be paid.
E. How to rectify the mistake and to get the correct refund
Mistakes in the ITR due to any of the reasons may be corrected by submitting a rectification form. Some basic information is provided below:
a. The procedure for rectification and correction of mistakes will be available shortly. In case of any queries please call at 080-43456700.
b. In case of any difference in date of birth or gender in Department records or in case of any need to correct the address, the data may be corrected by submitting a revised PAN application form (quoting the existing PAN number) with correct details and providing relevant proof at any TIN facilitation center.
c. In case of any mistake in MICR or Bank Account number a cancelled cheque showing correct particulars would be required to be submitted to CPC for correction in bank account number or MICR code.
d. In case the charging of additional tax and interest is only because of non- matching of tax payment or TDS, upon correction of the details by taxpayer or employer / bank, the additional tax and interest will be automatically reduced or eliminated.