Filing tax returns can be taxing if you don’t follow correct steps. In a packed Moneylife Foundation event on avoiding pitfalls and precautions to ensure safe tax filing, CA Ameet Patel covered all the critical aspects an individual tax filer needs to know and follow.
The salaried class knows how cumbersome tax matters are. They are weighed down by endless paperwork. It is complex, and we are never sure whether we have done it correctly. After the hard part is done and over, there’s still a chance that your tax return may be the one handpicked for scrutiny. This leads to tax notices and a nerve-wracking period to get your mistake rectified. So, how should one deal with the issue? Is there a simple way out? After all, it is estimated that 30% of tax returns have some flaws or the other. Moneylife Foundation invited Ameet Patel, a chartered accountant and a partner at Sudit K Parekh Group, to address these and other concerns of taxpayers in its 191st event “Pitfalls and Precautions on filing income tax returns” held on 13 December 2013 at the Royal Bombay Yacht Club.
The government has been pushing more and more taxpayers to file returns online. Those with more than Rs10 lakh income are required to file taxes online. While many often remain dependent on accounting professionals for tax computation, one can always verify or calculate his/her own tax liabilities. With the filing of income tax returns online it has become easy, especially for salaried people with a single source of income; however, if one has multiple sources of income, it can be very complicating. But are the innocent tax payers aware if all their income is duly reflected in the tax return, whether deductions claimed are genuine and whether the appropriate tax has been genuinely paid or not. The problem arises when a tax-payer’s return is picked up for scrutiny by the income-tax officer.
In an exhaustive presentation devoid of jargon as much as possible, Mr Patel covered tax filing basics, who should file tax returns, when it should be filed, penalties & interest in case of non-filing and which income tax form to use.
Mr Patel pointed out that to avoid getting caught in the scrutiny one must have at hand all documentary proof relating to the return. Among the documents required to be produced are the bank statement or pass book, dividend receipts, records of salary, interest income, gifts received and loans taken, proceeds from sale of shares/mutual fund units credited to the bank account and other credits.
The audience listened intently as Mr Patel described issues that could create problems for taxpayers. He pointed out that a salaried person should match the salary deposited in the bank with the amount entered in Form 16. The gross salary in the salary certificate, minus recoveries such as provident fund, profession tax, loan and TDS and non-monetary perks should ideally tally with the amounts deposited in the account. He also explained the importance of Form 26AS, which contains details about tax payments credited in the investor’s name in government records. You get credit for the taxes only if they appear in your Form 26AS which is a pass book of taxes. Every tax payer has a Form 26 AS. TDS credit claimed in the return of income and corresponding income should match with the information in your 26AS. Mismatch in tax returns can mean opening yourself for an IT scrutiny notice. Taxpayers should match every TDS entry-gross amount, date of deduction, etc, with their records before filing tax return.
If you have paid necessary taxes, filing tax returns in the correct way should ensure completion of the loop. Accurate and complete record-keeping throughout the year will help to make tax filing an easy process. E-filing can be a pain if you are not computer savvy, but with some learning and practice it can be smooth. Moreover, you can e-file for free on IT department website. Ensure that you give valid email address in your income tax returns. Experience suggests that refunds are received quickly in case of e-returns. Therefore, it is advisable to e-file your returns.
ITR-1 (Sahaj) is the most popular and simple form. But, individuals without business income should file ITR-1 or ITR-2? For assessment year (AY) 2013-14, individuals with exempt income of more than Rs5,000 cannot use ITR 1. Some examples of exempt income are: Dividend, Transport Allowance, House Rent Allowance (HRA), Leave Travel Allowance (LTA) and Interest on PPF (public provident fund).
Claiming deductions and exemptions should be inline with what is allowable and backed with documentation. Maintaining documents carefully and systematically was emphasised by Mr Patel, repeatedly. It will ensure that you can prove your point if any questions are raised in case of IT scrutiny, especially since these queries are raised years later. Among the documents required to be produced are the bank statement or pass book. Other important documents that a taxpayer must preserve are dividend receipts, records of salary, interest income, gifts received and loans taken, proceeds from sale of shares/mutual fund units credited to the bank account and other credits.
A return of income filed in time can be revised if one discovers any omission or any wrong statement therein, but before expiry of two years from the end of the relevant financial year (31st March).
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