Each year taxpayers file income tax returns on the income earned for the relevant financial or assessment year. However, the taxpayers generally commit mistakes in a hurry to file a return on time which can lead to an income tax notice. This year (AY 2020-21) the date has been extended up to November 30, 2020 from July 31, 2020 due to coronavirus pandemic. So, taxpayers have enough time to cut down on chances of mistakes.
Here are 5 common mistakes that can lead to an income tax notice:
ITR form selection
Many people commit the mistake of choosing the wrong ITR form, which leads to rejection of ITR. The taxpayers need to know that forms have been undergoing a change in the last few years. The return forms for this year have seen various changes and the government has also issued guidelines in this regard. The taxpayers must select the forms applicable to them on the basis of their income. For instance, a person only having salary income should go for ITR-1. Similarly, ITR-2 applies for someone having salary as well as capital gains.
The taxpayers should always ensure that ITR forms carry all information about their income sources. It is important to report taxable as well as exempt incomes in the form. Hiding of income is considered a serious offence under income tax rules. For example, taxpayers must mention the interest income earned on a savings account or FD even if the bank has deducted the TDS.
There are cases where people file tax returns but do not e-verify it. The taxpayer is needed to e-verify the ITR once filed. It can be done either through Aadhaar-based OTP, netbanking or demat account. One can also manually dispatch a signed copy of the ITR acknowledgment receipt (ITR-V) to CPC Bangalore. The return is invalidated if e-verification of the ITR is not done within 120 days.
Income and tax deduction mismatch
Mismatch in income and tax deduction is also a major mistake. The taxpayers are always advised to reconcile their income with that in Form 26AS and Form 16/16A before filing return.
Not filing ITR on time
One of the biggest mistakes by taxpayers is not to file ITR on time. The entire affair should not be a last minute thing. It not only invites penalties but also robs the taxpayer of various benefits. For example, losses made in business can't be set-off in returns filed in later years.
Also read: Scrip-wise reporting not needed for day trading, short term capital gains in ITR
Copyright©2023 Living Media India Limited. For reprint rights: Syndications Today