6 Precautions to Take While Filing Tax Returns

In India, the financial year begins on April 1st and ends on March 31st. So as a taxpayer, you get a four-month window to accurately file your tax returns. While it is common practice to submit your taxes through a financial consultant, e-filing has rendered the entire procedure easy. However, people are bound to make errors. Let’s look at some of these mistakes and how to avoid them.

Common Mistakes People Make While Filing ITR

Filing an ITR can be complex, and even small errors can lead to significant issues. Here are some common mistakes people tend to make:

1. Incorrect personal information: One of the most frequent mistakes is entering incorrect personal information, such as name, address, or PAN card details. This can lead to delays or rejections in processing the return.

2. Mismatched income details: Another common error is not matching the income details with Form 26AS. This form contains all the tax-related information, and any discrepancy can cause problems during assessment.

3. Wrong tax deductions: Claiming incorrect tax deductions or missing out on eligible deductions can affect the tax computation. It's essential to be aware of the deductions under various sections of the Income Tax Act.

4. Forgetting to report all income sources: Many taxpayers forget to include income from sources other than salary, such as interest from savings accounts, rental income, or freelance work.

5. Not verifying the return: After filing the return, it's crucial to verify it either electronically or through a physical signed copy. Failing to do so can render the return invalid.

6. Missing deadlines: Lastly, not adhering to the filing deadlines can attract penalties and interest on the due taxes. It's essential to file the return within the stipulated time frame.

Precautions You Need to Take While Filing ITR

1. Assemble the necessary paperwork:

Keep a record of all necessary paperwork. The supporting documents include:

• Passbook or Recent Bank Statement
• Rent and Lease Contracts
• Certificate of Interest
• Proof of Investments for which you can claim deductions under Section 80C and others
• Account Books
• Balance Sheet
• Profit and Loss Account

It is essential to understand that no paperwork is necessary for tax e-filing; the documents may come in clutch during inspections.

2. Check Form 26AS:

Form 26AS is a crucial document that provides a comprehensive summary of your tax-related information. It includes details of tax deducted at source (TDS), tax collected at source (TCS), and other tax payments. Download and carefully review this form to ensure all your tax credits are accurately reflected and match your records. If there is any mismatch, take the necessary action to get it corrected.

3. Clear Due Taxes:

Before filing your ITR, ensure all outstanding taxes are paid. Any unpaid taxes can lead to penalties and interest charges. If you've missed any tax payments throughout the year, settle them before filing. This includes advance tax, self-assessment tax, or any other dues. Clearing these will help avoid complications in the filing process. If you fail to do so, chances are your tax returns will be considered invalid.

4. Double-check your Information:

Thoroughly review all the information you've entered in your ITR before submission. Pay special attention to personal details, income figures, deductions claimed, and bank account information. Even small errors can lead to notices from the tax department or delays in processing your return. If you're using a pre-filled form, verify that all auto-populated data is correct and complete. Your provided data must appropriately correspond with the information in the PAN card database.

5. Filing Form ITR-V:

Most online taxpayers believe that Form ITR-V can be submitted anytime following a digital tax return file without a digital signature. However, this is not the case. If you are e-filing your tax return without a digital signature, you must submit an authenticated and signed ITR-V form to CPC Bangalore as soon as possible.

6. Avoid Late Tax Filing:

It helps if you always avoid late e-filing of tax returns. ITR filing delays often prove to be damaging to your tax preparation in the long run. The ramifications include:

• Interest being levied under Section 234A.
• Deductions and exemptions under Section 10A, 10B, 80-IAB, 80-IA, 80-IB, 80-IE, 80-IC, and 80-ID will not be provided.
• Losses cannot be rolled forward. (Housing property losses are an exception.)
• 5,000 INR will be charged as a fine under Section 271F.

The Benefits of Filing Tax on Time are:

• Easier Loan Processing
• Carried Forward Losses can be claimed.
• TDS refunds can be claimed.
• Credit Card and VISA applications are more straightforward.
• Contribution towards nation-building.

Why Is It Important to Be Cautious And Avoid Mistakes in Filing ITR?

Being cautious and avoiding mistakes in filing ITR is crucial for several reasons. Incorrect or incomplete returns can lead to delays in processing, scrutiny from tax authorities, and potential penalties. Accurate filing ensures compliance with tax laws and helps in the smooth processing of refunds. Understanding the steps to file income tax returns and being meticulous can save time and money.

The Impact of Budget 2024 on ITR Filing

Budget 2024 has introduced several changes that impact ITR filing. These tweaks include revisions in tax slabs, additional deductions, and changes in compliance requirements. For instance, the increase in the standard deduction limit can benefit salaried individuals. But changes in capital gains tax rules may affect investors. It's essential to stay updated with these changes to ensure accurate and compliant filing. Being aware of the new provisions can help in optimising tax savings and avoiding issues during assessment.

Can You Be Eligible for an ITR Filing Extension?

In certain situations, taxpayers can be eligible for an ITR filing extension. This can be granted in cases of genuine hardship, natural calamities, or technical glitches on the tax portal. To apply for an extension, you must submit a request to the tax authorities, explaining the reasons and providing supporting documents. Approval of the extension is at the discretion of the tax authorities. Staying informed about the eligibility criteria and the process can help in availing this benefit when needed.

Conclusion:

An excellent financial year starts with a tremendous financial year-end! After reviewing your previous years' tax filings, this exercise will enable you to avoid mistakes and optimally organise your money. Once you have corrected any flaws in your previous tax filings and prepared yourself for this year’s taxes, the best route is to go ahead with filing your returns, especially now that e-filing has made the entire process hassle-free and smooth.