TAX FILING - Is your tax return form errorfree?

BY SONU IYER


Last Saturday, I met my neighbour, Mr Pathak, a retired bureaucrat from the ministry of labour, during my yoga session. He looked worried. After some gentle probing, he shared the reason: it was an income-tax notice. Due to certain errors in his returns last year, the assessing officer (AO) termed his returns “defective return“ and issued a notice to him to rec- tify the defects. Under the Indian tax laws, if the defect in the returns is not rectified in the given time, the return is consid- ered “invalid return“ and it is assumed that the return was nev- er filed. You need to keep a few things in mind to ensure you file error-free returns.

Choosing the form

The first step is to pick up the correct form. There are seven income-tax return (ITR) forms prescribed by the Central Board of Direct Taxes (CBDT). You need to pick up your form de- pending on the kind of income you get.

ITR 1 (Saral II) is appli- cable for individuals who have salary income, income from oth- er sources and income from a house property.

ITR II is applica- ble for individuals and HUFs (Hindu undivided families) not having income from business or profession and so on.

Mention correct address and bank account number For timely correspondence with income-tax authorities and timely delivery of refunds claimed in the return form, it is im- portant to mention the correct address and bank account de- tails. In case of refunds where the electronic clearing system option is selected, it is mandatory to provide the correct mag- netic ink character recognition (MICR) code and bank account number in the return form. MICR code is a nine-digit number, which appears at the bottom of all cheque leaves next to the cheque number. Double-check permanent account number (PAN)

PAN is an important identification number through which in- come-tax authorities identify taxpayers and record their in- come, taxes deducted on his behalf and the taxes paid by him.

Quoting incorrect PAN may pose a problem both for taxpayers as well as to income-tax authorities. Incorrect quoting of PAN also attracts a penalty, so always double-check your PAN.

Disclose exempt income A common slip up is non-disclosure of income exempted from tax, such as dividend income from mutual funds or capital gains on securities.

Though exempted from tax, these must be reported in the ITR form.

Disclose pension income, it's taxable It is often understood that monthly pension income is not taxable but that's not true. Uncommuted pension (which has been annuitized to receive regular income) is taxable in the hands of the individuals.

Interest income is taxable at your tax rates We all earn interest income on our savings bank accounts and at times due to the insignificant amount, we forget to in- clude the interest income in our return of income, assuming that the bank would have already deducted tax at source (TDS).

Banks do not deduct tax on interest earned on savings account and deduct tax at a lesser rate on the interest earned on fixed deposits. You would need to pay tax on interest earned on sav- ings account and on interest on fixed deposits at your applica- ble tax rates.

Mention details of TDS In case of TDS, ensure that details, such as tax deduction ac- count number (TAN), and other details are as per the TDS cer- tificate. If details are not correctly filled, the AO would not al- low the credit of TDS and you may get a tax demand notice.

Annual information return (AIR)

While filing returns, it is essential to report the details of high-value transactions in the AIR questions. Such transactions are with respect to cash deposit in excess of Rs10 lakh, your credit card expenditure exceeding Rs2 lakh, purchase and sale of immoveable property valued at Rs30 lakh or more, purchase of units of mutual funds for at least Rs2 lakh, investment in bonds for at least Rs5 lakh, in shares for at least Rs1 lakh and Reserve bank of India bonds for at least Rs5 lakh.

Fill relevant ward or circle Do you know who is the concerned AO and where are you re- quired to file your returns? You should find out about the rele- vant ward and circle at the information desk set up at the tax office or other special filing locations. Filing of return in the in- correct ward or circle may lead to unnecessary hassles.

Online return submission Online filing can be done with or without digital signature.

But, for those filing it without digital signature, it is mandatory to submit the ITR V form generated online at the income-tax office in Bangalore within the prescribed time.

Finally, do not forget to sign the return form. Happy filing!

Sonu Iyer is tax partner, Ernst & Young.