Common mistakes that Income Tax Filers Commit

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Common Misdemeanors that Income Tax Filers Commit

There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him.” This quote, perhaps, best summarizes what many taxpayers think about doing their income tax returns. For why else would so many individual ITR filers use immature tactics such as concealment of income to lower their tax assessment? The quote is taken from Robert A Heinlein’s 1966 science fiction novel, ‘The Moon is a Harsh Mistress’, about an off-planet outpost’s revolution against earth and a character express his anguish thus.

Common mistakes that Income Tax Filers Commit

Tax laws have traditionally been complex and cumbersome but things are changing for the better. Ignorance of compliance norms could also be a key reason why people filing their own ITRs make such mistakes and end up receiving tax notices.

A reasonable checklist when doing your taxes is given below:

  • Have personal documents such as PAN, AADHAAR and bank details ready.
  • Use e-filing on online sites which auto-read Form 16 data into the income tax authority portal to minimise data input errors.
  • Count and write down all your sources of income. Determine your annual income.
  • Once you’re done with your tax form filling, make sure to either send the acknowledgement ITR-V form to the CPC, Bangalore via post or use a digitised signature on your tax portal account.

At a recent conference for central and state tax officials, income tax data was proposed to be analysed by using Big-Data analytics. This means that various huge databases across multiple agencies and institutions can be compared to identify tax discrepancies and violators. So, if most people belief that a certain method for evading taxes was safe because you didn’t get a notice last time, you may be in for a shock.

False Rent Receipts to claim HRA exemption

Consider for example, HRA exemption claims by producing a false HRA rent receipt signed by a relative or spouse. The Income Tax Appellate Tribunal decided that tax assessing officers will now have the power to demand proof of tenancy from the person filing his returns. The proof may include registered rent agreements, letter to a housing society identifying such tenant, water and/or electricity bills etc. Even though, a tax official may decide not to investigate a particular case, a person found in breach of his declaration can be punished, by law, with a jail term extending from 3 months to 2 years. Technology may help identify violators by tagging discrepant behaviour.

A better option, according to experts at All India ITR, a tax solutions firm, may be to actually pay a small amount as rent to the relative (but not spouse) with complete contractual documentation, rent receipts and cost break-ups. This will help you save at least some amount on your tax liability via the exemption on HRA.

Interest on Term Deposits with Banks is Taxable

Most individual income tax payers seem to be unaware that interest income on all but a few schemes aretaxable. The exemptions being:

  • Savings Bank Accounts if the interest income remains below Rupees 10, 000/-
  • Sukanya Samriddhi Yojana.
  • Tax Saving Bonds
  • Public Provident Funds, Employee Provident Funds
  • ULIP schemes

Banks will automatically deduct TDS if your interest income from any account exceeds the exemption limit or as in the case of Fixed Deposits, is fully taxable. Form 26AS generated by banks is assessed by tax authorities to determine income tax return discrepancies.

Can Multiple Bank Accounts help Save Tax?

Another mistake is spreading your accounts over multiple banks in the hopes that interest income would not be added up. Your PAN and AADHAAR are mandatorily linked with your bank account and it can easily be identified which accounts are linked with which PAN identifier.

Form 15G or 15H used to request banks not to deduct TDS, can be compared with 26AS to unearth concealment and perjury.

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All India ITR
All India ITR, one of India’s leading tax prep websites offering personal tax solutions focussing on income tax return filing through tech platforms, be it the web, Android or iOS, is dedicated to making tax returns as easy and convenient and yet as complete as possible. With value added services to help maximise tax savings and minimise tax outgo and tax investment advice the comparative advantage of specialization allows us to uniquely serve our clients. All India ITR is certified to conduct E-return intermediary services by the Income Tax Department of India.

3 COMMENTS

  1. Thanks for Nice and simplified blog with hands on. Great work by ITR team it really nice to explaining everything about taxes Thanks a lot! Great Presentation did not faced not even single mistake while doing practicals for the same.looking for such more blog.It’s really great that u take initiative to tell people about this and your way of representation of thought is really good.We can understand out problem very easily and get our answers faster. Excellent team work by All India ITR. Very easy to understand with all the clarity. Excellent team work by All India ITR.Great work by ITR team it really nice to explaing everything about taxes.
    Thnx for this this really help me alot.This blog is really helpfull for us to know more about ITR. This tell us everything that we should know about ITR. This is like a algorithm to fill taxes becaute it tell us step by step how we should fill taxes and yes it is also easy to understand. It tell breifly and accurately about taxes. The best thing about this blog is that we can get every information hear only. we shoud not go on different side to search about itr. It’s really great that u take initiative to tell people about this and your way of representation of thought is really good.We can understand out problem very easily and get our answers faster.Great keep it up.

  2. It genuinely helped me with the information i was seeking for. Appreciate it.
    through this blog i came to clear my doubt regarding whether we can use multiple bank accounts to Save Tax?
    This is the blog that i needed and i have been searching for such blog from a very long time now
    but today finally i found it and that to even in such an easy language which was really easy for me to understand and very easy to learn from it.With much anxiety i had gone through this and will share this with my colleagues too.
    Thank you!

  3. Thanks this blog has really helped me alot. This really helps and tells a process that is required to fill up an Income tax return. This blog tell us step by step how we should fill taxes and yes it is also easy to understand. Each and every details have been mentioned in simple and clear language.
    i would prefer anyone to have a eye on it to clear all their doubts. The best thing about this blog is that we can get every information hear only. we shoud not go on different side to search about itr. Great work keep it up.It tell breifly and accurately about taxes. The blog is very detailed and the way it explains the things is very easy to understand and to retain it really helps a person on how to fill up the ITR and how to enquire about it. Great work from ALL INDIA ITR since it is a very well written and a very useful blog.

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