Majority of the salaried taxpayers do file their ITR by themselves and thus are bound to commit some mistakes due to ignorance of law. In this article I will discuss some of the errors of omission committed by such taxpayers about some of the items of income, which are taxable, but are generally omitted to be included in our ITR. 

1. Capital gains on units of mutual funds switched:

With increased number of people investing in mutual funds, this mistake is committed by many mutual fund investors. We as an investors shift and switch our investments from one scheme of the same mutual fund house to other scheme of the same fund house for various reasons. The reasons may be non performance of a particular scheme or it may be due to shift to direct plan from regular plans or may be transfers   under Systematic Transfer Plan (STP).  Since these transactions are not reflected in the bank statements, on the basis of which your tax advisor files the ITR in case you are not filing your ITR yourself. As the transactions of switching are not routed though bank account the profit made on such transfer go unreported if not disclosed in the return of income. With the long term capital gains on equity oriented schemes also becoming taxable every transaction of switch or shift from one scheme to another results into a profit or loss and thus needs to be properly reported in the ITR.

2. Interest received on bank’s savings account and fixed deposits

Most of the salaried avail the facility of ITR filing provided by people either online or offline where the ITR filer  helps you file your ITR just on the basis of your form no,16 without even looking at your bank statements. Though the interest on saving bank account is eligible for deduction upto Rs. 10,000 but people, specially salaried carry an impression that it is fully exempt so do not include it in the income. So even if your interest from saving bank account is less than 10,000 rupees, you still need to include the same under the head “Income from Other Sources” and claim deduction under Section 80 TTA. You need to include whatever be the amount of saving interest in the income and then claim deduction upto Rs. 10,000/-. In case it happens to be more than rupees 10,000/- you are required to discharge tax liability in respect of such excess interest.

Many senior citizens place their money in fixed deposits with banks to earn regular income to support their monthly expenses. They feel that as tax is deducted by the bank, they need not include it in their income while preparing ITR. This is not correct. Discharge of your tax liability is different from the TDS on your income. This is specially true in case the tax rate applicable on your income is different from the rate at which tax is deducted.  It may either result in refund or may necessitate payment of further taxes in case the rate applicable to you is higher than the TDS rate.

3. Income earned on investment of minor child:

Income of each of your minor child is exempt upto Rs. 1500/-  in  a year and any income beyond this limit has to be clubbed in the income of the parent whose income is higher. Income to minor may arise from various sources like on the investments made out of gift received by the child. Most of the parents are not aware of this requirement of clubbing of income of your children with your income and contravene the law due to ignorance. They are under the impression that since the income of minor is below the exemption limit, there is no need to file an ITR and pay taxes.

4. Notional income in respect of more than one house property

As per income tax laws you are allowed to have only one self owned house as self occupied house property which is exempt from tax liability. However in case you own and occupy more than one house,  you to have select one of these houses as self occupied and other house/s are treated as deemed to have been let out. This situation may arise in cases where you have one house at the place of your work and the other house may be the one which is inherited by you in your native place without you even realizing it.

For such deemed to have been let out house property, you have to offer notional rent for taxation though no rent is received.  Please note that the notional rent is not the same as nominal rent. It is the amount of rent which the property is expected to fetch in the open market. Against such notional rent you can claim full interest for home loan as well as 30% standard deduction. Please note the interim budget has amended this provision of the law which is applicable from the current year where you are allowed to have two self owned and self occupied houses instead of presently allowed one.

So from above discussion it becomes clear that there are various items of income which need to be included in our income tax return but are not omitted to be included due to oversight or ignorance of the legal provisions.

The author is tax and investment exepert and can be reached at jainbalwant@gmail.com and @jainbalwant on twitter.

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4 Comments

  1. rugram says:

    Nicely written article. Thanks. While the emphasis in this article seems to be for salaried people, there is a reference to senior citizens with fixed deposits in banks. A reference to 80TTA is also given. It would have been helpful if 80TTB has also been mentioned, pointing out the difference between the two – many salaried people I know think that they can claim deductions under both 80TTA and B, The e filing system will probably not allow 80TTB claim of a non-senior citizen, which will perplex those who file the ITR themselves.
    Another point that needs to be explained is that interest from PPF a/c which many salaried persons have, needs to be reported in Schedule EI even if it be non-taxable. Those who receive any asset by way of gift or inheritance also have to declare these in the proper schedule, even if they be non-taxable.
    I request the author to expand the scope of this very useful and informative article to include more of such details (as mentioned above), for the benefit of not only the salaried but also senior citizens. Thanks.

  2. GANDHI MOHAN BHARATI says:

    80 TTA & 80 TTB NOT explained. In any case now one cannot file a ITR that easily himself; trying to do so will be definite invitation to trouble – Not that you will be in trouble for some omission or other. Instead of simplifying the ITRs are becoming more complicated. Imagine : I have only Pension and a House and Deposits. Just because I happen to have unlisted shares (delisted by the Stock Exchange) worth Rs.400/- I have to file ITR-2 running into so many schedules and I have to fill all with ZEROs. No one keeps details of Intra-day trading ISIN and Folio numbers; but we have to give it to IT Department. I am sure that it is a herculean task even with super computers to verify all. I am sure for some silly small mistake someone is inviting the wrath of the Authorities. Gone are the days when IT Filing was easy and with a smile.

    1. rugram says:

      Your comments are pertinent, that filing ITR is getting more and more complicated in recent years. The Govt. should simplify the laws and the Return forms.

      I understand that the need to provide individual ISIN nos. in Sch. CG has been made optional, vide a notification on 19.7.2019.

      There is another problem with unlisted shares: where does one get PAN of unlisted shares where the company is non-existent or is untraceable? Would such companies even have a PAN? Would this complete information of all unlisted shares be required every year in future too, duplicating efforts every year? Would it not be enough if the information sought on unlisted shares (but without PAN information), is restricted to only those unlisted shares of which there was a transaction (whether acquired or sold) during the FY? The opinion of many experts is that this additional detail of unlisted shares was introduced to capture certain transactions mostly of some private company shares; if this be true, then this requirement should have been restricted only to the applicable group of persons, not to everyone who owns unlisted shares.
      Thanks.

      1. VEERIAHGUPTA MATTA says:

        The article touches upon mistakes committed while filing the return. It would be helpful if the author has dealt with the manner in which the mistakes can be rectified. In my case while filing my return for AY 2019-20 I forgot to to claim deduction of my PPF subscription of Rs.1,50,000/- on account of which the web return showed further sum to be paid. I had instantly paid he sum as self assessment sum and submitted the ITR V to CPC. After one day I rechecked the return to find that the PPF subscription was not shown in 80C schedule. Immediately i filed a revised return and submitted to CPC. I hope CPC will consider my revised return and refund to me excess tax paid due to the mistake committed while filing the first return.

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