An exercising that is ordinarily completed by July 31 has currently noticed two extensions, and now the deadline for ITR filing for FY 2019-20 has been set to December 31, 2020. While the COVID pandemic is the major driver behind this transform, what has not changed are the errors taxpayer commit in this all-crucial monetary exercising. Let’s dig deep into the typical errors committed and see how you can hold them at bay.
Misconception about Filing ITR at All
A typical misconception harboured amongst folks is regardless of whether they will need to file ITR returns at all. There are lots of assessees with an annual earnings up to Rs 5 lakh whose tax liability is decreased to zero just after the applicable rebate of up to Rs 12,500 below section 87A. However, lots of assume that this indicates not filing ITR returns at all. This is not accurate. If you are under 60 with a gross annual earnings of more than Rs 2.5 lakh in a year, then it is mandatory for you to file your ITR with the tax division. On the other hand, if you are aged among 60 and 80 and earn a gross annual earnings of more than Rs 3 lakh, then also you will need to file your ITR.
Those above 80 with a gross annual earnings of more than Rs 5 lakh also will need to file returns. Note that even if your earnings is under the exemption threshold, you will need to file tax returns if you have either paid an electrical energy bill of Rs 1 lakh or more through the year or have spent Rs 2 lakh or more on foreign travel.
ITR filing is also mandatory if you have deposited Rs 1 crore or more in a existing account or have invested in assets in a foreign territory.
Hiding Interest Income
This is a different slip-up by most taxpayers. Note that interest earnings from bank fixed deposits, modest savings scheme and bonds, amongst other folks, are completely taxable. If you are not a senior citizen and interest from bank fixed deposits exceeds Rs 10,000 in a monetary year, then the bank deducts TDS.
Many assume that it requires care of their tax on interest. However, it is a misconception. TDS is only 10% of the earnings. If you are in the larger tax bracket, then your tax liability goes up. Also note that if interest earnings from all bank savings account is more than Rs 10,000 in a fiscal, you will need to spend tax on it. So, it is crucial to take these into account and the report the similar when filing ITR.
Mistake in Reporting Capital Gains
Reporting capital gains is a different location exactly where errors are probably to creep in. Understandably, their calculation is a difficult procedure as gains from unique monetary instruments attract unique tax remedy.
However, mutual fund homes have simplified the procedure to some extent as they provide investors with a statement of capital gains that segregate extended and brief-term gains. Mentioning all the transactions and gains in a year, these statements also reflect the post-indexation tax quantity. If you are filing your returns by way of a tax portal, all you will need to do is to upload it and the fields will get populated automatically.
For calculating gains from stocks, you will need a statement from your broker and for extended-term gains, you will need to mention scrip-sensible information.
Wrong Filing up the New Schedule DI
Following the pandemic, the final date for producing tax-saving investments for FY 2019-20 was extended till July 31 2020. In the earnings tax types, schedule DI enables taxpayers to claim exemptions on investments they produced through the extended period, till June 30, 2020.
However, you will need to adopt intense caution when filing it and mention only these investments that you want to contemplate for exemption in the prior fiscal, i.e., 19-20. Make confident you do not finish up placing information of investments that you want to contemplate for tax exemption in the existing monetary year (FY 20-21).
Also read: Your Money: What tends to make a bond illiquid, compared to a stock
Summing it Up
Filing ITR returns is not a difficult procedure offered you are properly conscious of the guidelines and adjustments. If not, it is prudent to seek the assistance of a qualified who will assistance you file an error-totally free return charging a nominal charge. Don’t hide something from the tax authorities as performing so can land you in problems.
(By Rahul Jain, Head-Personal Wealth Advisory, Edelweiss Wealth Management)