As the deadline for filing the income tax return (ITR) approaches, which is July 31, it’s natural to worry about meeting the deadline. However, the process can become much smoother if you are aware in advance of common mistakes made during the filing of ITR, as rushing at the last minute often leads to oversights and errors. Additionally, filing the ITR without proper reconciliation with relevant documents can result in underreporting, potentially resulting in notices from the income tax department. To avoid future income tax notices, it is important to remember the following steps while filing your ITR this year.
Interest from savings account
One of the most common incomes that taxpayers often overlook when filing their income tax returns is “interest”. This includes interest earned on savings accounts and term deposit accounts. While the bank deducts TDS on the interest earned from term deposit accounts, no TDS may be deducted on interest from savings accounts, and it may not be reflected in Form 26AS. “It is essential for taxpayers to remember that all interest, including interest from savings accounts, is taxable income and should be reported under the category of “Income from Other Sources”. However, it is worth noting that interest on savings accounts is exempt up to Rs 50,000 for senior citizens under section 80TTB and Rs 10,000 for others under section 80TTA. To claim this exemption correctly, taxpayers should declare the income and apply for the exemption under the relevant section,” said Neeraj Agarwala, Partner, Nangia Andersen India.
Report losses in ITR
Another common misconception among taxpayers is that they often fail to disclose or overlook reporting losses in their income tax returns. But if you don’t report your losses in ITR then you won’t be able to set off loss from income in future. “It is important for taxpayers to understand that losses incurred under various heads of income, can be carried forward for a specified period (generally 8 years). By properly disclosing these losses in the income tax return, taxpayers can take advantage of this provision and reduce their tax liability in subsequent years when they have positive income,” said Agarwala.
Check bank statements
To ensure that you don’t miss out on any income when filing your tax return, it is a best practice to check your bank statements thoroughly. “Your bank statements provide a comprehensive record of all the transactions and income credited to your accounts during the financial year. By reviewing your bank statements, you can identify your income sources to ensure that you accurately report all your income in the appropriate categories,” said Agarwala.
Match income declared in ITR with 26AS and AIS
The Income Tax department issues Form 26AS, an annual tax statement that includes crucial information such as tax deducted from your income, advanced tax payments made, and refunds received. It is common for individuals to misreport or underreport their income. Hence, it is highly recommended to reconcile the income declared in your ITR with the details provided in Form 26AS.
Additionally, the Annual Information Statement (AIS) is a more comprehensive document compared to the existing Form 26AS. While Form 26AS primarily focuses on Tax Deducted at Source (TDS) and Tax Collected at Source (TCS), the AIS serves as a single reference document for taxpayers, providing detailed information related to various sources of income. This includes salary, dividends, interest from savings accounts and deposits, transactions involving securities and mutual funds, off-market debt transactions, foreign remittances, and more.