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7 steps to filing your income-tax returns smoothly
For individual taxpayers and assessees other than those whose accounts are due for audit, the CBDT has extended the deadline to file FY 2020-21 income tax returns (ITRs) to December 31, 2021, from the previously extended deadline of September 30, 2021.
Returns must be filed meticulously to ensure accuracy and completeness. Any inconsistencies or holes in reporting can result in questions or tax notices from the IRS.
The entire procedure of filing returns takes place online. Furthermore, due to the demand of additional information as well as the changes in processes in the new income-tax portal, an individual may make mistakes. It’s also possible that the process will take longer than usual.
In light of the foregoing, the following are some typical errors that people should avoid while filing their ITR.
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Using correct ITR Form
The taxpayer must utilise the correct ITR form when filing the ITR. If a taxpayer files an ITR on the incorrect form, the tax department may issue a notice of defective return to the taxpayer under section 139(9) of the Act. In this case, the instructions on the form given by the tax department should be consulted in order to decide the relevant form to use depending on residency, kind of income, number of housing properties, and other factors.
For example, anyone with taxable income of less than Rs 50,00,000 (Rupees fifty lakhs) can use Form ITR-1 as long as he does not have any income from “Capital gains” or “Profits and gains of business or profession.” If you are a director of a firm or own unlisted stock, or if you own more than one residence or have agricultural income over Rs 5,000, you cannot utilise Form ITR 1.
Mentioning correct basic details
Individuals should make certain that they have the correct PAN, Aadhaar, and TAN numbers, as well as that their residential status is accurately established and stated. They should also double-check all of the information on the ITR Form before submitting the tax return.
Mention correct communication details
An individual must include accurate and up-to-date contact information, such as an email address, address, and phone number. Because the IRS has shifted to faceless assessments, all correspondence will be sent to the email address listed on the tax return.
Report all sources of income
Based on his residency status, a taxpayer must record all sources of income, including interest on fixed deposits (FDs), capital gains from the sale of mutual funds, including equity shares, and any other asset. Dividend income becomes taxable in FY 2020-21, and taxes must be paid accordingly.
All international assets and income, including overseas pensions, ESOPs, foreign bank accounts, and any benefits claimed under the Double Taxation Avoidance Agreements, should be reported by residents and ordinarily resident individuals.
Reconciliation of income in Form 26AS
Individuals should double-check that the income recorded on Form 26AS matches the income reported on their ITR. Any discrepancy will result in the department issuing a tax enquiry. For proper return processing, the taxpayer should ensure that the tax paid facts contained in Form 26AS are appropriately mentioned in Form ITR.
Reporting income from the previous employer
If you changed employment during FY 2020-21, you must declare income from your old employer as well as income from your present employer. Additionally, the standard deduction should be limited to a maximum of Rs 50,000.
Taxpayer should ensure that active and precise bank account details (i.e. account number, IFSC code, name of the bank, etc.) are stated in case of a tax refund arising from an ITR to enable faster arrival of the refund to the taxpayer’s bank account.
E-verify ITR
Only the e-verification of the ITR filed completes the ITR filing process. To e-verify a tax return, you can use Aadhaar OTP, Net banking, Demat account, bank ATM, or just email the signed physical copy of Form ITR-V to CPC Bangalore.
To facilitate smooth e-verification of returns filed, the taxpayer must ensure that PAN and Aadhaar are linked (the deadline for connection has been extended to March 31, 2022). The Indian mobile number must also be active. Tax authorities consider the return to have been filed once the e-verification is completed.