Even as Income Tax filing has gotten easier over the years with newer and simpler forms, e-filing, and several other reforms in tax rules, it remains a dreadful task for many. Tax filing with multiple income sources can be especially confusing. Here are a few mistakes to avoid when filing an income tax return(ITR):
1.The right form: ITR 1 is for those who have income from one source such as salary, pension, a house or other sources such as interest etc. less than 50 lakh. Apart from these, if you have earnings from agriculture, capital gains, foreign assets, as a partner of a company as well as income from other sources, fill ITR2. While those self- employed or running a business need to fill ITR3 or ITR4 (depending on income) when they are tax filing with multiple income sources.
2.Disclose interest: 9 out of 10 people do not report interest income from fixed deposits, recurring deposits and even tax saving deposits, out of ignorance. This is one of the mistakes to avoid when filing an income tax return. If the interest earned by you across all deposits in a financial year exceeds ₹10,000, tax deducted at source(TDS) is applicable, so you need to report this as earnings.
3.Dividend income and others: Dividends received on shares of companies, either Indian or foreign, need to be disclosed in the right ITR form for the purpose properly. If your total income from these is above the limit of ₹10 lakh, a tax rate of 10% is applied. Apart from this, capital gains from the sale of equity shares, equity mutual funds or property also need to be shared. Remember to provide details of the buyer if you have sold a property. Those with earnings abroad as well as foreign assets are also required to declare the same.
4.Income from the previous employer: If you have recently shifted jobs, remember to inform your new company about your earnings from the previous one. This is one of the critical mistakes to avoid when filing an income tax return. TDS on income from the previous employer would be reflected in your Form 26AS, and misreporting may result in a notice from the Income Tax department.
5.Filing tax is mandatory: If your net income before applying deductions available from 80C to 80U is above ₹2.5 lakhs, you need to submit a tax return. Even if you do not fall into the tax bracket, it is advisable to file a zero tax return for record purposes.