Mistakes you should avoid while filing your income-tax return this year

An incorrect form can render the return defective; under certain circumstances, you may have to file a return even if your income is below the exemption limit

The due date for filing income-tax return for the financial year 2019-20 has been extended by another month to December 31, 2020. While the deadline is now over two months away, you should not kick the can down the road and leave this task for the last minute. Begin gathering all the necessary information and documents and complete it while you have time on your side. 

Select the right form 

This year the Income-Tax (I-T) Department has notified seven forms—from ITR 1 to ITR 7. Select the right one, based on your income level, sources of income, and other criteria (see table). 

Selecting the wrong form can have repercussions. Says Archit Gupta, chief executive officer, ClearTax: “If you use the wrong ITR form, the return you have filed will be declared as defective.” 

An assessing officer could issue a notice to the assessee who then gets 15 days from the date of intimation to correct the defect. Says Kapil Rana, founder and chairman, HostBooks: “Returns  filed with wrong ITR forms can be revised according to the provisions of Section 139(5) of the I-T Act within the time allowed.” For instance, if an individual has salary income, income from one house property, interest income from bank and net agriculture income of more than Rs 5,000, but files his return in ITR1, he needs to revise it. 

If the taxpayer fails to correct the defect within the time allowed by the assessing officer, the defective ITR becomes invalid. Says Gupta: “In such a case, the taxpayer will be treated as non-compliant.” 

Don’t overlook any income source     

While filing the return, one needs to watch out for several mistakes that are common but can be avoided by exercising a little care. For instance, people often select the wrong assessment year, or fill incorrect personal details such as mailing address, phone number, etc. Furnish your latest details. Another common mistake is non-disclosure of income on which tax has been deducted at source. Says Gupta: “One needs to make sure that the corresponding income is included while filing the return.” 

Sometimes taxpayers fail to disclose income from all sources, such as gains or losses from investments, income from other sources such as interest on recurring deposits, etc. Another common mistake is non-disclosure of salary income from the previous employer when they have switched jobs during the year. 

New section for investments done during extension  period

The I-T Department has made several changes in the ITR forms to be used for tax filing for FY 2019-20. One is that it has provided a new ‘Schedule DI’ for furnishing details of investments made during the extended period. Says Rana: “The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, extended the time limit till July 31, 2020, to make investments, deposits, payments, etc. for FY 2019-20 for claiming deduction under Chapter VI-A, Section 10AA and Sections 54 to 54GB.” In other words, the time limit for making tax-saving investments was extended by four months. Says Vivek Jalan, partner, Tax Connect Advisory Services: “Since the I-T Department extended the deadline for making tax-saving investments in view of the coronavirus lockdown, the investments made between April 1, 2020, and July 31, 2020, need to be disclosed separately.”   

This time taxpayers can choose multiple bank accounts for payment of refund. Also, do not forget to avail of the benefits of Section 80EEA and Section 80EEB. These were introduced by the Finance (No. 2) Act, 2019 and provide deduction on interest on affordable housing loan and interest on loan taken for the purchase of an electric vehicle, respectively.

Under basic information in ITR 2, the assessee needs to disclose his directorship in companies or holding of unlisted equity shares. According to tax experts, it has now become important that taxpayers take stock not only of their income but also of their assets. Says Jalan: “A personal balance sheet providing the assets and liabilities of the taxpayer should be prepared.”  

Surcharge on income chargeable to tax under certain sections has to be reported separately in the forms. Also, from now on, if you have not been allotted PAN but have Aadhaar, you can give the Aadhaar number in lieu of PAN. 

File return if you meet these criteria 

The seventh proviso to Section 139 was inserted by Finance (No. 2) Act, 2019. Says Rana: “This was done to ensure that individuals entering into certain high-value transactions furnish their income-tax returns.” The provision requires that every person, who is otherwise not required to file ITR because his income does not exceed the maximum exemption limit, must do so, if he fulfils one of the following conditions: One, if he has deposited an amount or aggregate of amounts exceeding Rs 1 crore in one or more current accounts during the previous year; two, if he has incurred an expenditure of an amount, or aggregate of amounts, exceeding Rs 2 lakh for travel to a foreign country on himself or any other person; and three, if he has incurred an expenditure of amount, or aggregate of amounts, exceeding Rs 1 lakh on the consumption of electricity during the previous year.