The CBDT has again extended the timeline to file FY 2020-21 income tax returns (ITRs), to December 31, 2021, from the earlier extended timeline of September 30, 2021, for individual taxpayers, and assessees other than those whose accounts are liable for audit.
To ensure correctness and completeness, returns have to be filed diligently. Any inconsistency or gaps in reporting can invite queries or tax notices from the income-tax department.
The process of filing returns is done entirely online. Further, due to the requirement of additional details and also the change in processes in the new income-tax portal, there is a possibility that an individual may make mistakes. The process may also take longer than usual.
In view of the above, below are some of the common mistakes that individuals should avoid while filing their ITR.
Using correct ITR Form: While filing the ITR, the taxpayer should use the correct ITR form. In case a taxpayer uses the wrong form for filing ITR, the tax department may serve a notice of defective return under section 139(9) of the Act to the taxpayer. In this regard, instructions on the Form issued by the tax department should be referred, to determine the correct form applicable based on the Residency, type of income, number of house properties etc.
For example, any person whose taxable income does not exceed Rs 50,00,000 (Rupees fifty lakhs) can use Form ITR-1 provided he does not have any income under the head “Capital gains" and “Profits and gains of business or profession". You cannot use Form ITR 1 if you are a director in a company or have unlisted shares or even if you own more than one house or have agricultural income over Rs 5,000.
Mentioning correct basic details: Individuals should ensure that correct PAN, Aadhaar and TAN numbers are filed, and that the residential status is correctly determined and mentioned. They should also verify all the details filed in the ITR Form before final submission of the tax return.
Mention correct communication details: An individual must mention correct and current communication details such as email id, address, mobile number etc. As the tax department has switched to faceless assessments, all communication will be sent to the email id mentioned in the Income tax return.Report all sources of income:
A taxpayer, based on his residential status, must report income from all sources including interest income from fixed deposits (FDs), capital gains arising from sale of mutual funds, including equity shares or any other asset. From FY 2020-21, dividend income is taxable and accordingly taxes need to be paid thereon. Resident and Ordinarily resident individuals should mandatorily report all foreign assets and income, including overseas pension, ESOPs, foreign bank accounts, etc., and any benefits claimed under the Double Taxation Avoidance Agreements.
Reconciliation of income in Form 26AS: An individual should ensure that the income as per Form 26AS matches with the income reported in ITR. Any mismatch will result in tax query from the department. The taxpayer should ensure that the tax paid details reflected in Form 26AS are correctly mentioned in Form ITR for correct processing of returns.
Reporting income from the previous employer: If you have changed jobs during FY 2020-21, then income from previous employer must be reported along with income from the current employer. Further, one should ensure that the standard deduction is restricted to a maximum of Rs 50,000.
In case of tax refund arising in ITR, taxpayer should ensure that active and accurate bank account details (i.e. account number, IFSC code, name of the bank etc) are mentioned to ensure quicker receipt of refund to taxpayer’s bank account.
E-verify ITR: The ITR filing process gets completed only on e-verification of ITR filed. There are various options available to e-verify tax return i.e. using Aadhaar OTP, using Net banking, using Demat account, using bank ATM, or by simply sending the signed physical copy of Form ITR-V to CPC Bangalore. The taxpayer must ensure that PAN and Aadhaar are linked (date for linking is currently extended to March 31, 2022) and the Indian mobile number is active to ensure smooth e-verification of returns filed. Once the e-verification is complete, tax authorities consider the return to have been filed.
In case one discovers any error after filing tax return, then there is the option to file a revised India tax return within a prescribed timeline.(With inputs from Vivek Mistry, Manager, Tarika Agarwal, Manager and Pradnya Maniyar, Assistant Manager with Deloitte Haskins and Sells LLP)