Filing tax return at the last minute: What to do and what to avoid

Missing the deadline for the annual exercise can lead to penalties and more paper work

The deadline to file your income tax return (ITR) ends on July 31, Monday. Expecting the Income Tax department to extend the filing deadline isn't wise. "It is imperative to file your ITR on time in order to avoid penalties and interest," says Vipul Jai, partner, PSL Advocates and Solicitors.

Here's a checklist to help you file your ITR before deadline.

Start with collecting the required documents; it varies depending on your income. Essential documents for filing ITR include PAN Card, Aadhaar Card, Form-16, 16A, 16B, 16C, 26AS, Annual Information Statement (AIS), and Taxpayer Information Summary (TIS). Salary Slips, bank statements, investment proofs, interest income, and other Interest certificates

"Also nowadays, several companies, in their earlier days, compensated employees through the company’s stock options. In cases where the foreign holding company has issued such options to Indian employees of its subsidiary company, care needs to be taken by such employees in India to report these as foreign assets in their ITR," says Prateek Goyall, partner at law firm MV Kini.

Gather capital gains from the sale of property, mutual funds and shares, and foreign income or dividend income.

Correct form

It is important for the taxpayers to choose the correct ITR forms. "The taxpayer has to be extremely cautious in using forms while filing their ITR, as the usage of the wrong form may render the ITR defective, making the taxpayer liable to receive a notice under Section 139(9) of the IT Act," says Jai.

Under Section 139(9), you may receive a notice from the department asking you to file your ITR again if you file it using the wrong form. In the event that you fail to file a revised ITR within the given time, the ITR will be treated as "unfiled".

When an employee switches jobs, she may sometimes neglect to declare her salary income from the previous employer while still claiming all eligible deductions. Consequently, the subsequent employer ends up deducting lower taxes at the source. "To avoid the situation of a tax deficit, it is recommended that employees be transparent about their past salary income with their new employer. Failure to do so could lead to interest levies under Section 234B and Section 234C. By disclosing the complete salary history, employees can ensure a more accurate tax deducted at source (TDS) calculation by the new employer," says Naveen Wadhwa, deputy general manager at Taxmann, an online source for research on taxes.

This step helps prevent underpayment of taxes and the potential interest charges.

"One should also note that the information provided in Form 16 is not always correct, and one should corroborate it with the actual document one holds," says Ankit Jain, partner, Ved Jain & Associates, Chartered Accountancy Firm.

For example, the home loan interest is provided on a provisional basis in Form 16. While filing the return, the taxpayer should fill in the details of the actual home loan interest paid.

What if you don't have a Form 16? "If the previous employer does not provide Form 16, request it; if not received, file ITR using payslips for salary breakup and deductions and 26AS for TDS, and pay the tax due," says Goyall.

TDS and 26 AS

TDS is a system in which taxes are deducted from income at the time of payment. Form 26AS is a consolidated statement that reflects all tax-related information, including TDS, tax refunds, and more, linked to your PAN. Check your Form 26AS regularly to ensure that the TDS deducted by various deductors matches the actual tax liability; do so while filing the ITR at the last minute too. "If you find any discrepancies, take prompt action to rectify them with the relevant authorities. Filing your income tax return accurately and on time is crucial to avoiding penalties," says Ankit Rajgarhia, principal associate, Karanjawala & Company, Advocates.

"The taxpayer can claim the credit of such TDS from the total tax payable while filing his or her Income tax returns," says Suresh Surana, founder, RSM India, a network of assurance, tax, and consulting experts.

AIS is a tax passbook of the assessee that gives information about the prepaid taxes and prescribed financial transactions entered into during the relevant previous year.

"It is advised to match AIS/TIS with 26AS information to appropriately claim in the ITR Form," says Maneet Pal Singh, partner, I.P. Pasricha & Co, Chartered Accountancy Firm.

Paying dues

Before you file your ITR, you must determine how much tax you will have to pay. Use an online calculator to do so. Once you have determined this amount, subtract TDS as shown in various TDS certificates from it and then pay the balance, if any. Alternatively, if taxes already deducted exceed your tax liability, you will receive a refund from the department once your ITR has been processed.

Interest income earned by taxpayers on savings accounts or on investment instruments such as term deposits, bonds, debentures, etc. needs to be disclosed under the heading "Income from other sources". Surana says, "Any deduction to be claimed against such interest should be provided in the ‘Deductions under Chapter VI-A. For instance, taxpayers can claim deductions up to Rs. 10,000 (enhanced to Rs. 50,000 in the case of senior citizens). " Further, any interest that is exempt (e.g., PPF Interest, etc.) or any other exempt income should be provided in the Exempt Income Schedule, specifying the section under which such income is tax exempt.

"ITR Forms contain a specific Schedule EI to report the exempt income. It is mandatory to report all exempt income in this schedule," says Wadhwa.

Missing the deadline for filing Income Tax returns can lead to consequences. "Taxpayers may face penalties ranging from Rs 5,000 to Rs 10,000 based on their annual income, adding financial strain. Moreover, there is an interest charge of 1 percent per month or part thereof on the unpaid tax amount under Section 234A," says Aditya Chopra, managing partner, Victoriam Legalis, Advocates & Solicitors.

Delayed tax filing could also result in additional penalties under Section 271H for non-compliance with tax collected at source (TCS) or TDS filing obligations, ranging from Rs 10,000 to Rs 1,00,000. Chopra says, "To avoid such adverse outcomes, taxpayers should file their returns on time, explore the benefits of online filing for efficiency, and take prompt action to clear any penalties incurred.

Forms for tax returns

ITR-1: Can be filed if total income does not exceed Rs.50 lakh & does not own more than one house property.

ITR-2: It is for the use of an individual or a Hindu Undivided Family (HUF) whose total income includes salary/pension, House property, Unlisted Equity shares, Capital gain, foreign income.
 

ITR-3: It is filed when there is income from a proprietary business or is carrying on a profession.
 

ITR-4: It is filed when total income includes: Presumptive Income U/s 44AD, 44AE, 44ADA, salary up to RS 50 lakh.
 

ITR-5: ITR-5 is for firms, LLPs (Limited Liability Partnership), AOPs (Association of Persons), BOIs (Body of Individuals), Artificial Juridical Person (AJP), Estate of deceased, Estate of insolvent, Business trust and investment fund.
 

ITR–6: Can be filed by companies
 

ITR-7: For persons required to furnish returns under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D) or section 139(4E) or section 139(4F)

Source: IP Pasricha & Co