As you know July 31st is the last date for filing your income tax. As a taxpayer, it is a very important activity. Make sure your income tax return is error free. Nowadays, the income tax department is equipped with the latest technologies that they can catch you easily if you are trying to act smart by hiding your income to save tax. Whether it’s a traditional method of filing income tax return error free or through online, it is very important that the information is accurate.
As you are aware that the income tax department has asked the taxpayers to link their PAN number with Aadhaar card they are monitoring the data submitted by you. Any income which is not reported or under reported will attract heavy penalty including imprisonment. If you want to avoid income tax scrutiny, here are the points you must take care while filing your ITR.
Interest income from savings accounts and fixed deposit
It is seen that generally, a taxpayer avoid reporting interest income generated from a savings account and fixed deposits. Remember, these transactions are tracked by the income tax department as its linked with your PAN card and Aadhaar card. It will be reported by your bank even f you don’t report it. Bank will deduct TDS on the income from interest and will issue a TDS certificate. So it is better to check all your bank accounts before filing your income tax return.
Fake medical bills
To claim medical expenses, one need to submit medical bills. These bills are easily available at any chemist near you. There are people who charge 5% to 10% for issuing fake medical bills. It is not advisable to do such malpractice to save tax.
Dummy HRA bill
The taxpayer produces a fake rent receipt to claim HRA. This is the most common method by the salaried people to save tax. To curb this, the income tax department has made it compulsory to furnish the PAN card number of the owner. This is to cross-check whether the owner has shown the same amount as his income from rent or not. If the transaction does not tally, the defaulting party will be in trouble. Income tax department will also ask for rent agreement to check the authenticity of the transaction.
Hiding Other income
One of the most common mistakes a taxpayer does is not showing multiple incomes. Some people are doing freelancing work to earn extra money. Remember any income is eligible for income tax deduction whether its a big or small. So it’s better to report any such income to avoid penalty.
Fake LTA claim
Employees are submitting fake air and rail tickets to claim tax benefit. It is the employer’s responsibility to check the authenticity of such bills submitted by their employees. If someone found to be submitting a fake ticket, it’s liable for a job terminations by its employer. So it’s better not to use fake tickets to claim LTA.
Hiding Rental Income
There are many landlords who take rent in cash and do not show it as an income. As mentioned above, the income tax department has started collecting data about the PAN number of the person to whom the rent is paid. So it’s no more a hidden income now. Avoid hiding rental income to avoid the penalty by income tax.
Not reporting Capital gain tax
Buy and sell of assets like house, land, and stocks attract capital gain tax. There are two types of capital gain Long-term capital gain tax (occurs on the selling of an asset held for more than 1 year) and Short term capital gain (occurs on the selling of an asset held for less than 1 year). Remember, these transactions are linked to the PAN and now Aadhaar card. So it’s 100% recorded and you cannot hide it. It’s better to disclose and report all capital gain tax to avoid any penalty.
Claiming 15G/15H
Parking your income with your spouse and claiming tax rebate via 15G and 15H form is common. If the income crosses the exempted limit, you are not eligible for submitting the 15G or 15H form. Check your eligibility before submitting the form. Remember, these are again PAN/Aadhar card linked transactions.
False tax exemption
Form 16 is the summary of all the salary income you get from your employer. There is a fixed limit (upper capping) on the exempted amount under each head. There are many cases where these deductions are claimed in the income tax return but are not matching with form 16. IT department has an automated system to check the discrepancy between your IT form and form 16.
Charity/Donation Deduction
Donation or charity are allowed as tax exempted under section 80G,80GGA and 80GGC. This includes payment made to NGO or political party is exempted from income tax. Such transactions are mostly fake and are done just to save tax. These are under the watch of the income tax department. So avoid any false submission of such transaction.
Clubbing of income
If you are investing something in the name of your child who is a minor ( less than 18 years), anything you earn on such investment is counted as your own income and must be clubbed with your principal income while calculating your income tax slab.
Hiding bank account details
All the bank accounts are linked with PAN card and now with Aadhaar. So there is no point in hiding your bank details. Everything is being known to the income tax department. Hiding such details may lead to a problem in future.
Deduction on home loan interest
Many of us are booking a home while its still under construction. We take a home loan at the time of construction and pay loan amount to the developer in the trenches. The home loan interest paid during the construction period is not eligible for tax exemption. There are many cases where this home loan interest are claimed wrongly.
Conclusion
The income tax filing is a complex process for a layman. There are chartered accountants available to do the job for you. But for the accurate income tax filing, you need to submit the accurate details to them. Any such errors made knowingly or unknowingly may lead to huge penalty if it comes under income tax scrutiny.