Tax filing is important if you are an earning individual and are earning more than Rs.2.5 lakhs in a financial year. With the Government’s increased measures on curbing tax evasion, it has become necessary to file your taxes correctly. If you are a salaried employee, it becomes all the more important to be careful with your tax filing. In fact, the Income Tax Department has issued a warning for salaried tax-payers for filing their returns carefully.
In line with the tax department’s warning, here are 10 things which you, as a salaried taxpayer, should be careful about at the time of filing your returns –
- Not reporting other sources of income :- If you are a salaried employee it doesn’t necessarily mean that your only source of income is your salary. You might have other sources of income from your house property, from making any capital gains or from any other source. For instance, if you have invested in shares and mutual funds and earn dividends, they should be reported in your tax return under income from other sources. If you are earning other incomes and don’t report them, you would get into trouble with the tax authorities when you are caught.
- Submitting false bills for claiming HRA exemptions :- You get a tax exemption for House Rent Allowance. However, the exemption is available only if rent bills are deposited. Since HRA exemption reduces your tax liability you might submit false or inflated bills. This is not recommended as the tax department can authenticate your transactions through your PAN details.
- Skipping on interest income :- If you have a bank savings account, which you must have, or a fixed deposit account, the interest earned should be disclosed for correct tax filing. While your saving account interest would be tax-free up to Rs.10, 000 you should pay tax on the FD interest earned.
- Falsifying tax deductions :- Section 80C allows you to claim tax deductions up to Rs.1.5 lakhs. For an employee in the 30% tax bracket, this deduction lowers tax by Rs.45,000. However, you should not falsify Section 80C deductions if you have not used them.
- Falsifying charitable donations :- Charitable donations made are exempted from tax under Section 80G. Don’t misuse the deductions of this section for claiming tax reliefs. If you fail to furnish proof in case it is required, you face penal action.
- Not mentioning any rental income :- If you have sub-let your house to a tenant you should mention the rental income earned in your tax return. Not mentioning the rental income is an act of tax evasion which is a punishable offence.
- Opting for the standard deduction :- With effect from the current financial year 2018-19, salaried employees get a standard deduction of Rs.40,000 from their salary income. However, this deduction is applicable on your next tax return. Don’t use the deduction in your current return.
- Submitting false medical bills :- You can claim a tax-free medical allowance of up to Rs.15, 000 from your salary income for this year’s tax return. From the next year medical allowance has been removed. Do not submit false medical bills to claim maximum exemptions.
- Missing out on change of job :- If you have switched jobs during the financial year your tax return should show the income earned from both the employers. You should submit two Form 16s from both employers. Don’t miss out on furnishing the income from multiple employers.
- Claiming home loan interest of a higher amount :- You can claim a tax exemption on the interest paid on home loans. Don’t inflate your loan’s interest in a bid to earn higher exemptions. Moreover, check whether the interest is allowed as tax exemption or not. For example, if you are paying the interest on a home loan taken for an under-construction house or a plot of land, the interest expenses is not allowed as tax exemption.
Keep these points in mind before you file your returns. You could avoid fines, penalties and the hassles of rectifying wrong returns.