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HomeNewsBusinessPersonal Finance

ITR mistakes: Five return-filing errors that

could trigger income tax notices
Tax return-filing: Mistakes such as entering erroneous bank account details could lead to
a delay in crediting of tax refund due to you. However, more serious ‘errors’ such as
claiming fake tax exemptions or deductions for which you have no documentary proof
could lead to a notice from the income tax department.
Preeti Kulkarni

July 28, 2023 / 04:45 PM IST





Tax-filing mistakes

The countdown to the due date for filing income tax returns for the financial year 2022-23
(assessment year 2023-24) has begun.

You will have to file your returns by July 31 or be prepared to cough up a late-filing fee of Rs
5,000 and complete the process by December 31.

Now, that’s the first ‘don’t’ in the list of do’s and don’ts for filing income tax returns.

Also read: ITR filing mistakes: Common errors to avoid while filing income tax return for FY
2022-23

Do not claim fake deductions to secure tax refund

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The salaried class has been at the receiving end of the income tax department’s surveillance this
year. Many have received notices asking for documentary proof for deductions claimed.

As Moneycontrol has pointed out earlier, some salaried tax-payers claim deductions – not part of
the Forms-16 issued by their employers – while filing tax returns.

For instance, claiming the exemption for house rent allowance which is a part of pay packages
even when they have not paid rent and are not eligible for the exemption under section 10.

Since no documentary evidence is to be attached while submitting I-T returns, some misuse this
relaxation to secure tax refunds. However, this could result in I-T notices, as some salaried
individuals realised recently. It’s best to be honest while filing your returns, instead of inviting
trouble later.
Also read: Using AI and tech, Income-Tax department sends notices to tax evaders for fake
donations
Multiple income sources? D-I-Y approach has its limitations

Hyderabad-based chartered accountant Nagachandra Reddy, Founder, Somu & Associates says
he has come across such cases while filing returns this year. “Many tax-payers simply go by
videos and reels on social media platforms explaining how tax returns should be filed. Some end
up making mistakes that, in fact, result in additional tax outgo,” he says, citing the example of a
tax-payer who treated the gains made on sale of stocks after holding them for less than one year
as business income.

“It should have been treated as short-term capital gains that attract tax of 15 percent. Business
income is taxed at slab rate and in this case, he was in the 30 percent tax slab,” says Reddy.

If you have dabbled in shares and cryptocurrencies, sold mutual fund units, own foreign assets or
unlisted shares, you need to tread carefully with your returns. Non-disclosure can lead to tax
notices and penalties. If you find the process to be complex, seek the help of tax professionals to
see you through.

Also read: ITR filing: Claiming tax deductions without proofs can backfire, warn CAs

Ensure accurate reporting of interest income, capital gains

For salaried employees, Form-16 is the key document while filing returns. However, certain
incomes do not reflect in Form-16. For instance, even assuming that they do not draw income
from other sources, their savings account balance would earn interest, which is subject to tax
(though savings account interest up to Rs 10,000 is allowed as deduction under section 80TTA).
Likewise, capital gains that you may have made on sale of shares or mutual fund units won’t
show up in your Form-16.

As a result, some may miss reporting such income, exposing themselves to the likelihood of an I-
T notice. However, you cannot afford to make such mistakes now that you can easily refer to
Annual Information Statement (AIS), which contains details of all such sources of income.
Ensure that you go through AIS as also your bank statements and capital gain statements issued
by mutual fund intermediaries, broking houses and declare these incomes to avoid tax notices
later.

“With the introduction of Annual Information Statement (AIS), there is no question of missing
reporting any income. We have seen individuals who would have probably skipped mentioning
these income details, approaching us to file their returns after checking their AIS,” says Chetan
Chandak, Director, TaxBirbal, a tax consultancy portal.

Choose the right ITR form

Your sources of income will also determine the ITR form you ought to use. So, a salaried
individual with income from capital gains will have to use form ITR-2 to file the returns, besides
sharing details in the capital gains (CG) schedule. Similar would be the case with a salaried tax-
payer with income of over Rs 50 lakh, including rental income, unlisted shares, foreign income
and assets and crypto transactions.

The simpler form ITR-1 is for salaried tax-payers who own one house property, and earn interest
income and agricultural income of less than Rs 5,000. Their total income should be less than Rs
50 lakh. Filing returns through a wrong ITR form will render the ITR form ‘defective.’ You
could receive tax notices to file revised returns and failure to respond in time will result in your
returns being treated as invalid.

Do not ignore the I-T return verification process

If you think your ITR filing task is done for the year once you submit returns, you would be
mistaken. There is one more step that you need to take to complete the process. For your return
to be taken up for processing by the income tax department, you have to verify it within 30 days
of filing. You can do this online through the I-T e-filing portal using your Aadhaar, pre-validated
bank account, demat account and so on.

You can also download the ITR-V, or acknowledgement form, from the e-filing website and
send it by post to the income tax department’s central processing centre in Bengaluru. However,
it is best to choose e-verification through online modes as the process can be completed within
minutes.

It is important to stick to the deadline - if you verify your return 30 days after filing it online, the
date of verification will be treated as the date of filing returns. So if you verify the return after 30
days and the July 31 due date has passed by, it will be seen as return-filing post the due date, and
you might have to fork out late-filing fees of Rs 5,000 (Rs 1,000 if income is less than Rs 5
lakh).

Preeti Kulkarni is a financial journalist with over 13 years of experience. Based in Mumbai, she covers
the personal finance beat for Moneycontrol. She focusses primarily on insurance, banking, taxation and
financial planning

Tags: #Income Tax #IT Return Filing #ITR filing #personal finance #Tax #tax return filing

first published: Jul 28, 2023 04:45 pm

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