Income tax return: last-minute mistakes to avoid and details to check when filing your income tax return

Filing your tax return at the last minute can result in you failing to disclose some transactions or gathering all the necessary documents in time. For example, if you invest in cryptocurrencies, you must disclose those transactions in the form of promissory notes.

Karan Batra, founder of Charteredclub.com, said cryptocurrency exchanges do not have a standard format for account statements, meaning each transaction must be entered manually. “Income statements for cryptocurrency transactions are not itemized, unlike stocks. Reporting them requires extra caution.”

Second, there are some mandatory disclosures that require extensive information. Schedule FA (foreign assets) and Schedule AL (assets and liabilities) are two such requirements. Schedule FA asks for the asset’s acquisition cost, current value, maximum value in the year, address, and related income, if any.

Similarly, Schedule AL requests the cost of all assets and outstanding loans used to acquire those assets, from taxpayers with incomes above ₹50 lakh. Gathering all that information about different assets to declare them correctly can be time-consuming.

By filing your tax return at the last minute, you also risk missing the deadline if Form 26AS or Form 16 is incorrect and you are unable to rectify the incorrect information in time.

A solid advice

In any case, tax experts advise against failing to comply with the deadline, not only because it entails a penalty, but also because it has far-reaching consequences for taxpayers who opted for the old tax regime at the beginning of the year.

Taxpayers have until December 31 to file a late ITR, but with a fine of ₹1,000 for income up to ₹5 lakh and ₹5,000 for the rest. In addition, late tax returns are filed by default under the new tax regime, meaning you will have to give up all the deductions and exemptions you intended to claim.

This may have a significant impact on the tax expenditure of taxpayers who planned their taxes under the previous regime.

For example, the tax liability of a taxpayer with an annual income of ₹10 lakh—who can claim a deduction of ₹1.5 lakh below 80C and another deduction of ₹2 lakh on a home loan in the old regime—will be ₹42,500.

However, the same taxpayer who files a late tax return cannot claim these deductions and must pay a higher tax. ₹60,000.

To eliminate the stress of last-minute tax filing, mint offers you a practical guide to all the changes introduced in the ITR profits of the current year and the errors to avoid.

Disclosure of deductions

This year, ITR utilities are seeking more disclosures regarding taxpayers with any disabilities or disabled dependents, donations, capital gains account plan (CGAS), online gambling, and old bank accounts.

Please note that there has been no change in taxation under any of these headings. Instead, taxpayers are required to provide additional details to obtain deductions, where applicable, and report income from these sources in the prescribed format.

For example, income from online gaming must be declared under the heading “Income from other sources”. In addition, not only the amounts of winnings that have been credited to the bank account must be declared, but also the winnings accumulated in the gaming platform wallet.

For taxpayers with disabilities or disabled dependents, two new forms (80DD and 80U) have been added that must be completed to obtain eligible deductions.

Schedule 80DD, which allows deduction of medical expenses or insurance premiums paid for a disabled dependent, requires the PAN and Aadhaar cards of the dependent for whom the deduction is being claimed. Details of his disability, his relationship to the taxpayer and the date of filing and the acknowledgment number of Form 10-IA are also required to be submitted.

Meanwhile, Schedule 80U, which allows a taxpayer with a disability to claim a deduction for ₹75,000 or ₹1.25 lakh depending on the degree of disability, also seek details similar to those required for claiming deductions under Schedule 80DD.

Another important deduction that requires more information this year is charitable donations that qualify under section 80G. From this year, taxpayers must obtain a 10BE certificate from the institute to which they made the donation.

Please note that not all donor institutions do this by default. Therefore, the donor taxpayer must obtain it before the due date, as he/she must declare the ARN number mentioned in 10BE to obtain the eligible deductions on the donations made.

Taxpayers must gather all of these relevant documents in order to claim deductions.

Reconcile your AIS

Since the last two years, most of the entries in the ITR utility are pre-populated basic information provided in the Annual Information Return (AIS).

But this year, the AIS is full of errors, especially in share transactions. So, as a first step, you need to cross-reference Form 26AS, Form 16 (both A and B, if you are a salaried person), TDS and interest certificates and capital gains returns with the AIS.

The most common errors to watch out for are incorrect purchase dates and sales costs for stocks and equity mutual funds. Taxpayers who have bought back shares will see mismatches in the value of the entries by a huge margin, said Charteredclub’s Batra.

“When the taxpayers offered their shares for repurchase, all of them were debited from their CDSL (Central Depository Services Ltd) account. However, not all the shares were accepted and the remaining ones were returned to the taxpayers. Therefore, while the broker’s statement shows the value of the actual shares sold, the CDSL statement shows the value of all the shares that were offered, leading to the mismatch,” Batra explained.

“In the case of a client, the shares are worth ₹8 lakh were sold in buyback while AIS shows the value as ₹1 crore, which is the value of the shares he offered to buy back,” Batra said.

Taxpayers are also required to declare all capital transactions and capital gains as per the returns provided by brokers and not by the AIS. Even for interest income, it is recommended to refer to the Interest Certificate issued by the bank. These can be downloaded from the banks’ internet banking platforms.

Checking these figures against your various returns and forms will ensure that you do not file an erroneous ITR by relying on previously completed information.

It is imperative for taxpayers to provide feedback on errors in the AIS at the time of filing ITR. “Taxpayers can provide feedback and proceed with filing ITR without waiting for a resolution. In most cases, the AIS is updated within a few minutes based on the information received as the IT department is aware that it is riddled with errors,” Batra said.

Even if you don’t get a ruling quickly, file the ITR before the due date, as that gives you the option to file a revised return later if the ruling requires it.

Forms to fill out

The ITR is filed by default under the new regime. Taxpayers who wish to opt for the old regime must file Form 10 IEA before filing the ITR. Please note that this form must be filled by taxpayers filing tax returns in Form 3 or 4.

In ITR 1 and ITR 2, taxpayers are given the option to opt out of the new regime by simply selecting the old regime from the beginning.

Gautam Nayak, Partner, CNK & Associates LLP, said another important form that needs to be filed along with ITR is Form 67, to avail the benefits available under Double Taxation Avoidance Agreements (DTAA).

Form 67 is used to claim the foreign tax credit, he explained.