Five common mistakes to avoid while filing income tax returns
After providing details of your tax saving investments and other deductions, it is time for another major step: filing income tax returns. Whether you are filing returns online or via post, filing of taxes is often a last-minute process that may lead to missing important information or committing mistakes.
Listed below are some of the most common tax filing mistakes you must avoid.
- Not reporting all the sources of income
The most common mistake tax payers make is failing to report all the sources of their income. One type of income that is forgotten by many individuals is interest earned on a bank savings account and on Fixed Deposits (FDs). This income is taxable according to your respective tax slab. Usually banks deduct 10 percent as Tax Deductible at Source (TDS) on the interest income earned on FDs. However, if you fall under a higher tax slab of say, 30 percent, you are liable to pay tax accordingly. Not reporting these incomes might attract a notice from the income tax department.
In addition, if you have changed your job recently, make sure that you report the income earned through your previous employer as well.
Also, any income earned by a minor through investments is taxable according to the tax slab of the parent with higher income. The income of the minor is clubbed with that parent’s income while computing net taxable amount. In case you have made investments in your children’s name, keep this in mind while filing your taxes.
- Not paying tax on house property
Many people assume that there is no income from multiple residential properties and thus there is no tax payable; however, this is a misconception.If you own more than one house, you are liable to pay a certain amount as tax, even if you have not earned any income from it or if it is unoccupied. Tax is not payable only for the house that you occupy. Income is to be attributed to all other houses and tax on house property is payable by you.
- Providing incorrect postal and email address
Since all the necessary information is communicated by the income tax department via email or post, it is extremely important to enter these details correctly before filing your taxes. A minor mistake in filling these details means that you may miss important notifications. So check and re-check your postal and email address when you file your income tax.
- Not reporting income that is exempt
Many types of incomes like long-term gains, dividends, etc. are exempt from tax. Although you do not have to pay any taxes on such incomes, it is important to report them. Remember that the brokerage house or investment company will send these details to the income tax department.
- Not checking the form before filing
Whether you have filled your forms manually or online, mistakes are bound to happen. It therefore makes sense to check the filled-up form thoroughly in order to avoid errors. Even if your tax consultant or accountant fills the details on your behalf, you need to personally check the form to ensure accuracy of the information.
Remember that simply taking personal interest in the tax filing process can help you avoid most of these mistakes.
The minimum term for a Tax Saving FD is 5 years. You can obtain a tax exemption of utmost Rs. 1.5 lakh. Calculate returns using FD Calculator.