A Delhi-based financial professional once received a letter for not deducting TDS when he bought a flat, the previous year. In his part, he said, “I had no idea that I was supposed to deduct 1% of the value of the house and deposit the amount with the government on behalf of the seller.”
These instances nowadays are very common because the tax department has strengthened the tax policies by using advanced IT tools. They have stepped up efforts to ensure tax compliances. Officials are seen cracking down on invasions under to new rules of tax leak. Tax records are being put under the scanner and notices are being sent to individuals if the computer-aided selection system notices a discrepancy. Here is a list of Top mistakes of omission and commission which can get you an invite for a Chai Pe Charcha with Income-tax Department and trust us it won’t be that nice as it sounds.
In this article, we will discuss about...
Not Reporting Interest Income and Other Incomes
Yes, To be precise we are talking about ‘interest’ income that comes from fixed deposits, recurring deposits and even saving the bank. Although Interest earned on saving A/c up to Rs 10K is exempt it’s no that you need not report it. Hence Either other incomes are small or big, taxable or exempt, You need to disclose it when filing your return. Don’t even think to hide it as they have access to your all income source just by referring your PAN No and Now even using aadhar card.
Income from the Previous Job after a job Change
Every time an individual switches jobs, he is usually found fails to report income from the last employer to their new employer. This may happen purposely or by ignorance or just like that. This happens because they don’t feel the need of associating the previous earning details with the present one and this leads to the creation of new tax exemption and deduction to the employee. Instead of Rs 2.5 lakh basic exemption and Rs 1.5 lakh deduction for tax saving investments under Section 80C, he gets Rs 5 lakh basic exemption and Rs 3 lakh deduction. Thereby, he ended up paying much less tax than he was supposed to pay.
This is a common problem faced by people who switch jobs without keeping an eye on their taxes. They are saddled with a huge tax liability along with interest on late payment of tax when they sit down to file their tax returns in June-July.
The proper way is to submit the details to HR of the new company and consult a CA to understand the impact and pay differential taxes as soon as they realize it.
Not Filing TaxReturn On Time
Taxpayers, irrespective of their age are bound to file their tax returns. Anybody with an income above the basic exemption is liable to file his tax return. The basic exemption is Rs 2.5 lakh per year for people below 60, Rs 3 lakh for senior citizens above 60 and Rs 5 lakh for very senior citizens above 80. The rest of the people need to apply.
But again, for example, if one’s annual income is Rs. 4.2 lakh and an investment of Rs 1.5 lakh is made under the section 80C, then the tax comes down to 0 but the filing of income tax still required even your tax liability is NIL. There is this misconception with many taxpayers that if the tax liability is NIL there is no need to file, which is completely wrong.
For a lot of people, the confusion stems from a rule introduced four years ago, where salaried individuals with an income of up to Rs 5 lakh a year were exempted from filing returns. However, that rule has long been withdrawn.
Not Reporting Property Transactions
As salaried taxpayer most of you might be well versed with form ITR 1, however, in the year when you have any property related transaction such as buy or sale of the property, A different form needs to be filed, i.e. ITR 2. Most of the Salaried employees either don’t report such transaction as there is no place to report such transaction in ITR 1 or simply file it in the wrong way, leading to tax notices.
The Proper way is to seek an honest opinion from an Expert firm before filing such return.
Just simple step a little bit of guidance from an expert tax filing firm can avoid a lot of incipience of handling an IT Return Notice.
AKT Associates is a leading online tax filing firm, we can help you to file your return properly and assist in making proper tax planning to save taxes.