You must be aware that the Income Tax Department has recently issued a cautionary advisory to the salaried taxpayers that those suppressing information while filing their income tax returns (ITRs) will be penalised, followed by prosecution as well. One of its reasons being that lots of taxpayers increase their deductions or exemptions or reduce their taxable income while filing their ITRs in order to reduce their tax liability. Whatever be the case, if you want to avoid being labelled a tax evader by the I-T Department, you need to file your IT returns carefully from now on. Here are a few points you should keep in mind while doing so:
1. Avoid claiming false deductions
It has been observed that in order to increase the amount of refund, some people claim bogus deductions under various sections of Chapter VI-A. “However, one should not reduce one’s income in the ITR by availing false deductions. If the I-T Department finds any discrepancy in your ITR, then it will scrutinize your case in detail and levy penalties upon you, followed by prosecution as per the provisions of the law,” says CA Abhishek Soni, Founder, tax2win.in.
2. Avoid inflating interest on home loan repayment
In ITRs, many people claim more amount of interest on home loans than mentioned in their interest certificate. In that case, the tax department may ask you to submit relevant proofs. If it finds the proofs to be insufficient, then it can take penal action against you. Therefore, do not try to inflate the claim of interest paid on home loan.
3. Avoid mistake in case of multiple Form 16s
If you have changed your job/jobs during the year, you will need to refer to multiple Form 16s along with your Form 26AS while filing your income tax return. “The tax department has all the data related to salary income and TDS deducted on it. So, you must combine your income from all the employers and calculate the amount of tax. Then subtract the TDS, which has already been deducted, from the total tax. Resultantly, you will get to know if you need to pay more tax,” says Soni.
4. Avoid claiming false tax exemptions
Several people claim false tax exemptions under Section 10 like HRA, LTA, medical reimbursement, etc. These can be easily identified by comparing data in the tax return with Form 16, Form 16A and Form 26AS. Also, the new ITR forms require you to provide the break-up of your salary, all taxable allowances and perquisites etc. Therefore, try to save tax only by availing valid tax benefits.
5. Avoid fake claims of capital gains
If you have any income or loss from trading of Shares or Future and Options, then do not forget to include it in your ITR. “Since all your financial accounts are linked to Aadhaar and PAN, so the I-T Department can easily compare the gains made by you in trading in equity or MFs with that reported in your return and any under reporting or miss-reporting can lead you in trouble,” informs Soni.
6. Avoid exclusion of rent on housing property
If a person owns more than one house, then he should calculate and add the notional rent/ actual rent of the deemed let out property in his taxable income and pay due taxes on it. “Many taxpayers are either not aware of this clause or ignore it to save taxes. Now, since all the properties are linked to your PAN and Aadhaar, the I-T Department can easily verify them. In case it is found that you have under-reported your income, then it can result into penal action,” says CA Vertika Kedia, Co-Founder, Tax2win.in.
7. Avoid exclusion of agriculture income
Very few taxpayers know that agricultural income, which is not subject to income tax, is also added to your taxable income to decide the tax rate applicable on your total income. If you do not account for it, then the taxmen may compare your agricultural income with land revenue records.
8. Avoid exclusion of interest income
Depositing your hard-earned money in banks either in savings account or FDs always seems a secure and easy option. However, many taxpayers tend to forget to include the interest income earned from those fixed deposits and savings bank account in their ITRs. Avoidance of it may land you into trouble, and the I-T Department may issue notices in such regard.
Keeping all the above-mentioned points in view, it is clear that under-reporting or misreporting your income to the I-T Department or adopting any malpractice to evade tax may cost you dearly. Therefore, be vigilant while filing your I-T returns to avoid being labelled a tax evader.
Source by financialexpress..