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Shattering 10 frequently believed tax-filing myths

In spite of paying taxes and making investments to save taxes, one can be denied the benefit if they aren’t reflected in income tax returns or returns filed remain invalid.

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Thousands of new taxpayers would be brought under the tax-filing ambit due to the rampant tracking initiatives of the Income Tax Department and there are hardly a few days left to file your tax returns within the deadline of July 31, 2017. But in the scramble to meet the deadline, don’t forget the essentials to file the tax returns for the assessment year 2016-17 (pertaining to income earned in the financial year 2015-16).

Note that everyone whose total income during the previous year – without claiming exemption – exceeds the threshold limit currently pegged at Rs 2.5 lakh (Rs 3 lakh for senior citizens) needs to file a return of income.

The first step in ensuring correct returns is to keep a tab on recent changes to the tax-filing rules.

-- Anyone who has a refund to claim and whose total income exceeds Rs 5 lakh (except super senior citizens) will necessarily have to e-file tax returns.

-- Under-construction property buyers are now allowed to claim a deduction of interest of upto Rs 2 lakh if the project is completed within five years (earlier, it was three years). Further delays reduce tax deduction to Rs 30,000.

-- Another change on the immovable property front is that the date of agreement fixing the amount during transfer would be considered to compute capital gains and not the date of registration, if payment has been made through non-cash modes.

-- To claim exempt agricultural income, you need to mention expenditure incurred too.

-- To claim capital gains tax exemption using Capital Gains Account Scheme, one would need to submit details such as previous year of transfer, exemption section, amount utilised out of capital gains schemes, year in which you purchased new assets, balance amount unutilised.

I use last year’s form

The rules on who can use which form are revised by the Income Tax Department based on the need to distinguish categories and information requirements. For instance, tax payers who have salary income and own more than one house property need to use a new form ITR 2A starting last year and not ITR 2.

This apart, your income earned last year may be different than that earned in 2014-15, so fill the correct form. “ITR -1 is not applicable if the agricultural income is in excess of Rs 5,000. In such case, ITR-2 is required to be filed by the taxpayer,” says Suresh Surana, founder of RSM Astute Consulting Group.

I can skip verifying Form 26 AS

Though taxes are deducted by employers and banks for interest, one must verify whether they are reflected in the Annual Account Statement or Form 26 AS before filing returns. Mismatches are the single largest cause of incorrect tax computation. “This year onward the assessing officer has been given the right to make suo moto adjustments to returns before assessment if some income is seen in Form 26 AS, but not declared in the return,” points out chartered accountant Paras Savla, stressing on the need to check Form 26 AS.

Tax cut, don’t mention

Individuals mistakenly believe that the income where taxes have already been deducted such as bank fixed deposit interest, EPF withdrawal before five years, etc. need not be reported as tax has been cut. But the calculations need to be based on your tax bracket as the TDS deduction rate might be different from your slab rate – 10/20/30%.

All interest up to Rs 10,000 exempt

The new exemption of up to Rs 10,000 on savings bank account interest is mistakenly understood to encompass FD interest too. However, one has to add the interest amount from fixed deposit to his/her own income and pay the applicable tax. Also, co-operative bank FDs and RDs too are liable for TDS deduction and one shouldn’t forget them.

I need not mention exempt income

There are incomes on which tax isn’t applicable such as stock dividends below Rs 10 lakh, savings bank interest below Rs 10,000, profits from shares held for more than one year and agricultural income. Though you don’t need to pay tax, you can’t ignore them. “There is a separate Schedule Exempt Income (EI) in the return of income wherein a taxpayer is required to report the details of exempt income,” adds Surana.

I can enter capital gains in any column

Exempt long-term capital gains should not be entered in capital gains section. Under short-term capital gains (STCG) many users confuse between STCG under section 111A and STCG others. As a result, the amount is entered against one another. This should be avoided as the resultant would be doubling of income from capital gains.

Spouse pays joint Home loan EMI, I claim

Joint owners of a house should claim tax benefits as per their share of the house. Co-owners who haven’t been paying the EMI cannot claim the interest and principal deduction. Similarly, rental income too should be shared in the proportion of ownership as the total income would shoot up if both mention the gross rental income.

Didn’t submit proofs, can’t claim

You can claim deductions even if you haven’t submitted proofs to the employer, but have invested the amount or made the relevant expense during the financial year. But it is quintessential to fill the specific schedules especially for 80 G, 80 IA and 80IB to claim the deduction, even if not submitted to the employer.

I need to mention one bank account

You need to fill not just one bank account detail for refunds, but fill in details of all bank accounts that you hold accept dormant accounts (inoperative for 3 years). “A taxpayer failed to disclose other bank account details. Later, when I-T officers found transactions through AIR (annual information returns), notice was issued and the taxpayer went through unnecessary hassle,” recollects Savla.

Check and cross-check personal details, especially bank account numbers. “There are taxpayers who often omit the initial zeros mentioned in their bank account number, which could lead to refunds being credited to erroneous accounts,” says Savla.

Task over after submitting returns

Many make the mistake of forgetting all about returns once submitted. But, returns aren’t considered valid untill they’re verified electronically using your mobile or email (only those earning below Rs 5 lakh), net banking account, ATM, demat account or the AADHAR No. or submitting a physically signed acknowledgement to the Bangalore CPC of Income Tax Department.

One can escape many hassles by giving the returns a careful read before submission and checking for these errors. However, if you realise that you have submitted an erroneous return, you have the option to revise it till March 31, 2018 or the completion of your return assessment, whichever is earlier.

“Disclose all income as the penalty provisions have changed and can stretch up to 200% of the tax evaded. The assessing officer has no power to reduce the penalty,” warns Savla.

But avoid using links in emails from fraudulent email IDs such asincometaxindia.gov.india@gmail.com or incometax.gov@yahoo.com to file returns. “Taxpayers are cautioned that they should not respond to such phishing mails and avoid downloading any attachment, which may contain a virus or malicious software,” CBDT has notified.

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