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New do's and don'ts while filing tax returns

Updated: Jul 15, 2013 05:02:15pm
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New Delhi, Jul 15 (KNN)  Tax payers are likely to be impacted by the several new guidelines with regard to e-filing, choosing the right form and tax deducted at source (TDS) introduced by tax authorities for filing returns this year.

Firstly, tax authorities have made it compulsory for businesses to e-file their tax returns.

Electronic filing of income tax returns is likely to jump sharply this year as the government has brought down the mandatory limit of online filing to income above Rs 5 lakh from the earlier Rs 10 lakh in the financial year 2012-13 or assessment year 2013-14.  

The deadline for filing income tax returns however remains unchanged at July-31.   E-filing of tax will certainly ease the rush to file the returns among the taxpayers in July. 

Secondly, taxpayers can either file the returns themselves by logging on to the Income Tax Department website www.incometaxindiaefiling.gov.in, which is free of cost or through e-return intermediaries, who charge a fee of around Rs 250 to Rs 1,000, depending on the kind of services required. 

Nearly 34 million or just around three per cent of the 1.2 billion people in India filed tax returns in 2012-13. 

A person filing return however needs to adhere to a few new guidelines:  A number of tax e-filing portals have come up to help tax payers file their tax. They charge nominal fees between Rs 200 and Rs 4,000 for uploading their tax returns. Private tax filing portals guide the taxpayer throughout the process to avoid mistakes.  The process is not time consuming as it can be done within 45 minutes.

It can also be done for free on the official website of the Income Tax Department. Tax returns are picked up for scrutiny through a computer-assisted selection procedure that has no human intervention. If the computer detects certain discrepancies in the return, it raises the red flag and the individual gets a notice.

In fact, there is a greater probability that a return filed offline will get picked up for scrutiny. The information in the physical return is ultimately fed to the computer by operators.  A typing error at this stage can introduce a discrepancy in the return, leading to a notice being sent to you.

It is important to choose the right form.  The online filing data reveals that more than 32 per cent of the 2 crore individual taxpayers used the basic ITR 1, also known as Sahaj, to file their returns last year. Only 11 per cent used the more complicated ITR 2. These statistics indicate that a lot of taxpayers who should have used ITR 2 filed their returns using the simpler Sahaj form. The income level does not matter; what is important is the source of income. For instance, if one had made capital gains or earned rent from more than one house, he should have used ITR 2.

Whether the popularity of ITR 1 was out of ignorance or a deliberate attempt to conceal income is not clear.  However, the government has now changed the rules to capture a better picture of the income of taxpayers. If you received more than Rs 5,000 tax-exempt income during 2012-13, you will have to use the ITR 2 for filing your return this year.

Automatic choice for e-filers  if the person has only income from salary and no exempt income, his return will be filed using ITR 1, but if he made some capital gains, has rental income from more than one house or his exempt income exceeds 5,000, ITR 2 will have to be used.

However, taxpayers who upload their returns through the official Income Tax Department website will have to be more careful about the form they use.  If a taxpayer uses the wrong form and the mistake is discovered by the tax authorities, the return may be rejected. Every year, thousands of defective returns are sent back to taxpayers.

If you get a notice, you will have to file a revised return within 15 days. If you meet the deadline, the return is treated as valid. Get delayed and your return will become invalid and you will have to file afresh.

With regard to TDS, before you sit down to file your returns this year; spend a few minutes to check whether the tax you paid for last year has been correctly credited to your name. The Form 26AS has details of the tax deducted on behalf of the taxpayer and can be easily checked online.

Significantly, the forms seek more information.  The government has made it mandatory for partners, professionals and businessmen with an income of over 25 lakh to furnish details of their assets and liabilities. There is a new 'Schedule AL' in the ITR 3 and ITR 4.  If the taxpayer's income exceeds 25 lakh during the year, he will have to declare his assets and liabilities.

Basic mistakes that are made while filing are availing of deduction twice, not mentioning exempt income, not including interest, not checking TDS details, and not mailing ITR V on time. (KNN)

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