“Do I really need to file an ITR if I just draw a salary, have no other income, and tax is already deducted on my salary?”
“Is the interest income on my FDs taxable?”
“Do I have to report the interest earned on my FDs even if I don’t receive the FDs till they mature?”
“What do I do if I forget to submit my investments to my employer?”
Are you struggling with these questions?
They say a person does not know how much he has to be thankful for until he has to pay income tax on it. In this blog, we talk about the top 5 mistakes you need to avoid while filing your ITR for income from salary.
1st Mistake to avoid while filing Salary ITR
The most common mistake many salaried taxpayers make is not claiming deductions when filing ITR if they forget to submit investment proofs to their employer. If you are a salaried individual, your employer will ask for investment proofs for deduction claims, assessing tax liabilities, and deducting TDS if you are following the old tax regime. Sometimes, if you don’t have the necessary information to claim a deduction, don’t know what deductions are eligible, or simply don’t have the time or forget, and don’t submit the investment proofs to your employer, he might end up deducting higher TDS. So if you don’t claim the deductions you can, you might end up paying more taxes than you really need to. Although, even if you did forget to put in the needed documents, you can still claim the deductions when filing your ITR and reduce your tax liability according to the TDS deducted by your employer or get an income tax refund of the excess tax you have paid.
2nd Mistake to avoid while filing Salary ITR
The second most common mistake salaried taxpayers make is thinking that their salary is their only source of income, and that hence, they need to file ITR-1, not disclosing any other income however big or small. So if you think you don’t have any investments or don’t earn interest on FDs because you won’t get that until they mature, think again. Unless you are from the commerce field or know a lot about finances, there’s little chance that you would know this. Whether it’s income from investments, rental property, side hustle, or other sources, you always need to report it in your income tax return. Even if it’s expensive gifts from relatives or winnings from a lottery, you need to report it in the ITR. And you need to report exempt income like dividends and interest on PPF. Form 26AS can help you keep track of this by displaying any income that tax has been deducted on.
3rd Mistake to avoid while filing Salary ITR
Another mistake by salaried individuals filing their ITR is thinking that if TDS has already been deducted from their salary, they don’t need to file an ITR at all. Sometimes, people can go years thinking their taxes are being paid from their salaries before receiving a notice from the Income Tax Department years later and being charged for concealment of income years later. Then, they end up paying the taxes along with interest and penalties for concealment. Even if your employer has deducted TDS from your salary, and there is no other tax liability you need to pay, if you are earning more than 2.5 lakhs in a financial year, it is mandatory that you file your ITR if you want to avoid massive amounts of interest and penalties.
4th Mistake to avoid while filing Salary ITR
Salaried people also fail to disclose interest income in their ITR. Even though you would think that interest earned on fixed deposits is not taxable, or that interest on a savings bank account is exempt up to Rs. 10,000, you still need to disclose these earnings as income from other sources. Under section 80TTA, you can claim deductions of up to Rs. 10,000 on savings account deposits held in a post office, bank, or cooperative society. Under section 80TTB, if you are a resident senior citizen aged 60 or older, you can claim a deduction of up to Rs. 50,000. Not declaring this extra income in your ITR can be considered concealment of income and can lead to a penalty. So if you want to avoid a hassle in the future and some massive interest and penalty, file your taxes correctly.
5th Mistake to avoid while filing Salary ITR
Finally, most salaried people fail to report income from their previous employer within the same financial year. Say you switch jobs in April. This means you have earned three months’ income from your previous employer and the rest from your current employer in the same year. In this case, your previous employer might not have deducted TDS on the three-month salary because the amount might not have crossed the 2.5 lakh mark. But combined, your income is greater than 2.5 lakhs and you need to pay taxes on it. Many people try to hide this to save tax on the income from the first employer who has not deducted TDS. But if you switch jobs mid-year, you need to disclose income from the previous employer to your new employer so they can deduct the TDS correctly while paying you at the end of the financial year. Or you could pay advance tax before the end of that financial year to save on any interest costs when filing ITR. You should also get Form 16 from your previous employer and match the numbers with those in Form 26 to avoid any mismatch between what you report in your ITR and what income reflects in Form 26AS.
Now you know what mistakes not to make while filing your ITR. You need to file an ITR even though TDS has been already fully deducted. And your salary income is not your only income; you should always declare any interest that you have earned on saving bank accounts/ FDs, or any other income you have earned from other sources like gifts, investments, rent, or anything else. So make a note of any money you have received in the current year and disclose it when filing your income tax return. Also declare the salary you have received from your previous employer and try to claim your investment deductions even if you forgot to declare those investment proofs to your employer while deducting the TDS.