??Mistakes to Avoid While Filing Income Tax Returns (ITR)

?? Selecting the Incorrect Form

Choosing the appropriate ITR form is crucial. The income tax department processes your return based on the form you select. The selection depends on the nature of income or the taxpayer's category. For instance:

• ITR-1: For salaried individuals with income below Rs. 50 lakh and no capital gains.
• ITR-3: For individuals with income from a business or profession.

Consequences:

• Filing the wrong form can result in a defect notice, requiring rectification within a specified time limit. Failure to rectify can lead to penalties and delays in processing.

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?? Not Disclosing All Sources of Income

All sources of income must be disclosed, not just the primary source. This includes:

• Savings account interest
• Fixed deposit interest
• Rental income
• Short-term capital gains
• Any other income

Consequences:

• Overlooking exempt income, such as long-term capital gains up to Rs. 1 lakh from equity shares or mutual funds, can lead to questioning by tax authorities, potential penalties, and additional tax liabilities.

?? Failing to Link PAN with Bank Accounts

Linking your PAN with your bank accounts is essential for the smooth processing of refunds. Ensure your bank details are accurate and updated on the income tax portal.

Consequences:

• Delayed refunds and potential complications in processing your ITR.

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?? Not Reconciling Form 26AS And AIS Statement

Form 26AS provides details of TDS deducted, TCS collected, and taxes paid during the financial year against your PAN. All incomes included in Form 26AS must be reported.

Consequences:

• A mismatch between Form 26AS and Form 16 can lead to lesser refunds or notices from the tax department, requiring you to provide explanations and possibly pay additional taxes.

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?? Not Mentioning Exempted Income

Taxpayers must report all income, whether taxable or exempt. If your gross income exceeds Rs. 2.5 lakh, you must file an ITR.

Consequences:

• Not mentioning exempt income can invite notices from the tax department, leading to additional scrutiny and possible penalties.

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?? Failure to E-Verify ITR V

Filing the ITR is not complete without verifying it within 30 days. Verification can be done:

• Offline by sending the ITR V (Acknowledgement) to CPC Bangalore by post.
• Online using Aadhaar OTP, EVC, etc.

Consequences:

• Without verification, the ITR is considered invalid, and the department may send a notice. Ignoring the notice will be treated as non-filing, attracting penalties and non-filing fees.

?? Overlooking Capital Gains from Mutual Fund Switching

Capital gains from switching mutual fund units often go unreported as these transactions don’t appear in bank statements.

Suppose you invested Rs. 1 lakh in an equity mutual fund, and its value has grown to Rs. 1.2 lakh. If you switch to another mutual fund:

• You redeem the original investment, realizing a gain of Rs. 20,000.
• This gain may be subject to capital gains tax, depending on the holding period.

Consequences:

• Failing to disclose these gains can lead to discrepancies in your ITR, potential tax liabilities, and penalties.

?? Offsetting and Carrying Forward Losses

Taxpayers can offset losses against certain types of income and carry forward losses to future years to reduce tax liability. However, strict rules apply:

• Losses from one head of income cannot always be set off against income from another head (e.g., business losses cannot be set off against salary income).
• Losses must be carried forward and set off within specified time limits.

Consequences:

• Failing to correctly offset and carry forward losses can result in higher tax liabilities and missed opportunities to reduce future tax burdens.

By avoiding these common mistakes, you can ensure a hassle-free ITR filing experience and avoid unnecessary complications. Always double-check your information to simplify the process. ????????

Remember, you can always file a revised return to correct any errors or omissions in your original return. Keeping detailed records and cross verifying all information before submission can help mitigate most issues, ensuring compliance and peace of mind.