Avoid Tax Mistakes:
Every New Year, we make many resolutions, but there are only a few people who follow the resolutions made. For most people, the resolutions fade with each passing day. One of the important resolutions is compliance with income tax to avoid tax penalties and notices. Nowadays, tax professionals have an integrated database with which they can track all the financial transactions.
The following are a few steps that you need to keep in mind to avoid tax mistakes and protect yourself from the prying eyes of the Income Tax Department (ITD).
Don’t forget to file IT returns:
It is essential for every person whose salary is above Rs 2 Lakhs to e-file of manually file their ITR. For those who earn more than Rs 5 Lakh to e-file the tax returns. ITD works to keep an eye on the non-filers of tax returns and tax evaders.
This is done through a system called Computer-Assisted Scrutiny System (CASS) which matches the information on the basis of your PAN and ITR filed by you. In case, this information mismatches, then ITD will issue a notice against you. The chances of getting this notice are when you don’t file your ITR, and there are transactions recorded against your PAN.
To avoid TDS, never submit the wrong declaration in Form 15G/15H:
There are people who split their deposits in different banks and try to avoid tax deductions. First, you need to check whether you are eligible to submit 15 G/H or not. According to law, if your income from interest on bank deposits is more than Rs 10,000 annually, then the bank will deduct TDS.
People who avoid tax deductions by submitting Form 15G or 15H in spite of having taxable income are being caught easily through their PAN. A wrong declaration can cost you Rs 10,000.
Don’t hide income:
Generally, most of the taxpayers do not declare their saving bank interest as well as exempt income. For this, I can charge you a penalty up to 300 percent of tax evaded anytime in the next eight years. Another common mistake is not disclosing FD interest where tax has been already deducted by the bank.
If the total income is more than Rs 5 Lakh, the tax slab will be 20 percent. Therefore, an extra 10 percent tax needs to be paid on FD interest. Similarly, income acquired up to Rs 50, 000 from other sources like rental income on a property, any commission, gain or loss on capital assets should be disclosed in the ITR.
Match returns data with Form 26AS:
Form 26AS is the document that shows all your income and tax credits. It is suggested to match your return data with this form before filing tax returns.
The tax deductions being claimed in the ITR are not included in 26AS, and that’s why various tax returns notices are sent to taxpayers. It could be due to submitting the wrong PAN to the employer or a case of typo error by the employer or delay in submitting the TDS value by the employer.
Invest in tax saving schemes after understanding tax laws
There are many tax saving options that can help you in saving lots of money. But it is suggested to inquire about the current tax laws before investing.
The tax laws are changed every year with terms and conditions for eligibility. Nowadays, it is important to show the PAN of the landlord for the rent payment of more than Rs 1 lakh per annum.
If you do not give PAN to the employer, then it can lead to tax deductions up to 20 percent of salary even if you come in a lower tax bracket.
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