In this week’s ET Wealth Wisdom podcast, we list out some tax filing mistakes that can get you a notice and the steps you should take to avoid getting one.
TranscriptHave you ever got an income tax notice?
What! No! Why would you ask me such a question!
Dear god don’t be so dramatic!
I am not being dramatic, you know that even a small slipup or mismatch can get you a tax notice from the department
Why is that?
The tax authorities are going after tax evaders and how! They have actually spruced up their efforts to catch evaders. The new ITR forms ask for detailed disclosures, leaving no scope for taxpayers to conceal income in their returns.
And hasn’t the CBDT even made it mandatory for everyone to file their returns online, barring super senior citizens above 80 years?
That is true
Hi everyone I am SM and I am TJ and in this week’s ET Wealth Wisdom podcast we will list out some tax filing mistakes that can get you a notice and the steps you should take to avoid getting one.
Changes in ITR forms
Multiple changes have been introduced in ITR forms for the financial year 2019-20. The new forms ask for detailed disclosures to plug tax leaks.
Until last year, you had to report a consolidated figure under the ‘income from other sources’ head. This year onwards, interest income from your deposits (fixed deposits and recurring deposits), bank accounts, income tax refund and pass-through income have to be declared separately under each head.
What Tania is saying is that you can no longer hide or declare interest income selectively in your returns.
If you have sold immovable property, you also have to share buyer’s PAN details, address and percentage share in the property, among other details.
In another change, details of unlisted shares held at any time during the financial year must also be provided.
Those who hold employee stock options or ESOPs in their unlisted company will get affected by this, say CAs.
The scope of disclosure for foreign assets has also been expanded. Under the new columns of depository and custodian accounts, you must report assets and bank accounts where you are a beneficiary or signing authority.
Failure to report any information amounts to concealment of income and is liable for stiff penalties.
Misreporting LTCG on equity
This is the first year when taxpayers will report long-term capital gains (LTCG) from equity investments. LTCG above Rs 1 lakh in a year will be taxed at 10%. These gains are to be reported in schedule CG, section B4.
You don’t need details of dates or name of the security transferred, but have to key in accurate details about total consideration value, fair market value and cost of acquisition. You can easily get the statement on capital gains from your broker or mutual fund house.
Take the help of a qualified professional to sail through the process. In online portals that allow free self-filing, you just have to upload the capital gains statements that will automatically populate your LTCG.
TDS on property deals
From 1 June 2013, any buyer who has purchased an immovable property worth more than Rs 50 lakh has to deduct 1% TDS from the payment to the seller and deposit it in the government account. However, just a timely payment may not be enough to save you from the taxman.
TDS has to be deducted on each payment, including advance, instead of the final payment. This is where most taxpayers go wrong.
In the case of staggered instalments, you will be required to deduct TDS on each payment and pay it through Form 26 QB within 30 days of the date of deduction.
Your work doesn’t end here.
You have to get correct PAN details of the seller and issue Form 16B to him in time. Delay in filing or submission of either form will not only get you a notice but also attract interest and late fees of Rs 200 per day.
Not deducting TDS on rent
The government extended TDS on rent to all salaried individuals and HUF in 2017. If you pay rent above Rs 50,000 per month, you have to deduct 5% TDS from the rent paid to the landlord and file it at the end of the financial year.
The rule should not be taken lightly. Non-deduction of TDS is non-compliance with the tax law. The tax filer may have to pay a penalty equal to the TDS amount.
One common mistake is to calculate TDS on the total rent paid in a financial year instead of every month.
Mismatch in income, expenses
Big brother is watching you all time.
The IT Department will now pry into your social media accounts to detect any gap between your expenses and reported income.
That is right.. it is all fine and dandy posting Instagram worthy pictures of your holiday to the Seychelles. But if there is a mismatch.. you could be in trouble
Nobody wants the taxman knocking on their doors.. there are many things that can go wrong while filing your tax returns. That is why you should not leave it till the last minute..
Start the process now.. get all your documents in place and take your time and file your ITR
And on that note that will be all from us for this week.. come back next week for more personal finance wisdom