As the July 31 income tax return (ITR) filing deadline looms, tax experts are urging individuals to exercise caution and avoid last-minute mistakes that could lead to defective returns, delayed refunds, or even scrutiny notices from the tax department.
Crucial Steps to Prevent Filing Errors
One of the most frequent errors taxpayers make is assuming ITR-1 is suitable for all salaried individuals. Adhil Shetty, CEO of BankBazaar, highlights that if you've earned capital gains or traded in stocks, futures, or options, you likely need to file ITR-2 or ITR-3. Filing the incorrect form can render your return defective, causing significant delays in refunds and potentially triggering a tax notice.
Another critical step is to reconcile your reported income with Form 26AS and the Annual Information Statement (AIS) before submission. Any discrepancy between your declared income and the information already available with the tax department can invite scrutiny or necessitate a revised return later on. Ensure all income sources, including capital gains and taxable gifts, are accurately disclosed.
Don't Count on Deadline Extensions
Despite annual speculation, Shetty advises taxpayers to plan around the notified July 31 deadline unless an official extension is announced. Historically, extensions have been granted only under exceptional circumstances, such as widespread technical glitches. Waiting until the final day leaves minimal time to correct validation errors or resolve portal-related issues.
Key Checklist for a Hassle-Free ITR Filing
- Choose the Correct ITR Form: Select ITR-1, ITR-2, or ITR-3 based on your specific income sources to avoid a defective return.
- Match Income with Form 26AS & AIS: Reconcile all income details to prevent mismatches and potential scrutiny.
- Report All Income: Disclose every income source, including capital gains and taxable gifts, to avoid notices.
- Validate Bank Account: Ensure your bank account is validated on the income tax portal for successful refund credits.
- Submit Before July 31: File early to allow time for error correction and avoid last-minute rush.
- Complete E-verification: An unverified return is considered not filed; complete this step immediately after submission.
Avoiding Refund Delays and Tax Queries
Filing your return is only part of the process. Refund delays are often caused by an unvalidated bank account or a failure to e-verify the return within the prescribed time. Refunds can only be credited to a validated bank account, and an unverified return is treated as if it was never filed. Taxpayers must ensure their bank details are accurate and confirm their return status shows as 'verified'.
ITR Beyond Tax Compliance
A timely and accurate ITR offers benefits beyond just meeting tax obligations. Lenders frequently use ITRs as proof of income stability, particularly for self-employed individuals or those with multiple income sources. A consistent filing history can strengthen applications for home loans and help credit card issuers assess repayment capacity, leading to better credit limits.
Properly Reporting Gifts
Taxpayers who received gifts during the financial year must report them carefully. Gifts from specified relatives (parents, spouse, siblings, children) are exempt from tax, regardless of the amount. However, gifts from friends or other non-relatives become fully taxable if their aggregate value exceeds ₹50,000 in a financial year.
Shetty cautions that even tax-exempt gifts should be disclosed. With stricter reporting requirements for exempt income in the current assessment year, maintaining records such as bank transfer proofs, gift deeds, and evidence of relationship can help address any future queries from the tax department.
With only a few days remaining until the deadline, experts strongly recommend avoiding last-minute filing. Prioritizing the correct ITR form, cross-checking details with Form 26AS and AIS, validating bank accounts, and promptly completing e-verification are crucial steps for a smooth and hassle-free tax filing experience.