The last date for filing income tax returns for FY19-20 is approaching fast. The I-T department had extended the due date by 10 days to 10 January 2021 from 31 December 2020. If you are yet to file your income tax return, here are some of the common mistakes to watch out for.
1. If you have made any transaction related to shares or mutual funds sales during the year, you must fill out those details under capital gains or loss made. In case you have booked gains or loss in your mutual fund or shares and invested the proceeds in another scheme or company, even then, it will be considered a sale or redemption and capital gains or loss will be calculated depending on the purchase and sale price. Therefore, it is important to mention the same in your income tax return as the I-T department may consider it as concealing income and serve you a notice or charge penalty.
“Non-reporting may invite a notice from tax department and penalty, which is levied, at the rate of 50% of the tax payable on under-reported income or 200% where under-reported income is in consequence of misreporting," said Tarun Kumar, Delhi-based chartered accountant.
This year the taxpayer is required to fill out scripwise details for reporting long term capital gains. Now long-term capital gains (LTCG) from equity shares and mutual funds above ₹1 lakh are taxable. A grandfathering mechanism has been introduced for listed shares and specified units purchased before 31 January 2018 on which such tax is not levied. To capture these details, a separate Schedule 112A has been introduced in the ITR forms. You are required to disclose details of sale of equity shares in a company or unit of equity-oriented fund on which Securities Transaction Tax (STT) is paid under Section 112A.
2. Another common mistake is not taking in account the interest income earned on the saving account. The interest income from a savings account of up to ₹10,000 in a financial year is not taxable. The interest income has to be shown in the income tax forms under the head “Income from other sources" and a deduction has to be claimed from the same under section 80TTA.
3. Not claiming TDS or TCS back is another mistake taxpayers make. This may lead to higher tax liability. It is important that the taxpayers see their Form 26AS before filing their income tax returns so that they don’t miss out on any income on which tax has been deducted. Plus, it is important to calculate the tax liability after considering the TDS and TCS paid. “TCS is collected from buyers who pay any amount as consideration for purchase of motor vehicles of value exceeding Rs. 10 lakhs. Credit of TCS can be claimed in ITR," said Kumar.
4. It is important to pre-validate your bank account while filing your income tax return especially in cases where you have tax refund to claim. The tax department will not credit refund in case your bank account is not verified. Now, the tax department credits the refund directly to the bank account of the taxpayer. So, it is important to verify your bank account. It can be done online through the tax department’s website.
5. Don’t forget to e-verify your income tax return as the tax filing process is not complete till you e-verify the tax return.