Since a large number of salaried people file their income tax return on their own, some may commit some omissions not with any intention, but out of ignorance of the law. Based on my experience practicing as a Certified Public Accountant, I wish to point out certain errors of omission generally made with respect to certain taxable income.
Income of minor child
Under tax laws, any passive income arising from a minor beyond ₹1,500 are required to be included in the income of the parent with the highest income. This income may come from investments made by parents of the money received by their minor child as a gift on various occasions. Many parents are unaware of this minor child’s income discord law and therefore are inadvertently breaking the law by not including it in any parent’s ITR.
Mutual fund capital gains
Investments and repayment of your existing investments are made through various ways, such as the Systematic Investment Plan (SIP), the Systematic Retirement Plan (SWP), and the Systematic Transfer Plan (STP). In the case of STP, where money is transferred from one scheme to another periodically, investments and repayment are not reflected in your bank statement and therefore any profit made on such a refund transaction in the originating scheme may not declare. Similarly, the investor may switch from a scheme of the same fund house to another fund house at random, which may also not be reflected in his bank statement.
So, get the transaction statement of all your mutual fund investments during the year and check all transactions to avoid mistakes. Since all capital gains are now taxable, whether they are debt schemes or equity-oriented schemes, proper and complete reporting of such transactions is necessary.
Interest income
As per my observation, most salaried people get their ITR through the ITR filing facility, either online or offline, where the ITR filer files their ITR based only on their No. 16 form without bothering to collect information about your other income. Because of this, a lot of income may not be reported. In almost all these cases, the interest from the savings bank account is surely not declared, although you can claim a deduction of up to Rs. 10,000 for that. Many people, including salaried employees, are under the impression that such interest is totally exempt and does not need to be included in the ITR. In strict accordance with the law, even if your interest in the savings bank account does not exceed Rs. 10,000 / -, the correct course of action is to first include it in your income under the heading “Income from other sources” and then claim the deduction under Section 80 of the TTA. In case the savings interest is more than Rs 10,000 / – you will have to pay taxes on the excess.
Many older adults, who place their retirement corpus in various fixed deposits to obtain regular income for their monthly expenses. Many of these seniors are under the impression that since taxes have already been deducted from their interest, they are not required to include such interest in their income when filing the ITR. This printing is wrong, as the TDS rate and the tile rate applicable to you may be different, and in case the tile rate is more than 10%, the rate at which the tax is deducted, you need to pay the differential tax separately. In case the slab fee is lower than the TDS fee or you have no tax liability based on your total income, you may be entitled to claim a refund.
Even for fixed deposits that are automatically renewed, interest until maturity on the fixed deposit must be included in your income, even if it is not credited to your bank account.
Theoretical income with respect to more than one home property
Currently, an individual can own two houses of his own as self-occupied as tax exempt. But in case you have more than two houses for your occupation or that of your relatives, you should treat the excess houses as considered rented and offer a theoretical rent in your ITR even if you have not received any rent. Many taxpayers don’t know. Such a situation can arise especially in cases where you have two or more houses in the place of your work and a house inherited by you in your place of origin without even realizing it.
Therefore, in case you have more than two houses that you own and use or keep them for your own occupation, offer the notional income with respect to any of the excess houses to be on the correct side of the law. Notional income is not the same as nominal income. Notional rent is the market rent that the property is expected to earn if it is rented on the open market. Once a home is deemed to have been rented, you can claim full interest on the home loan, as well as a standard deduction of 30% subject to the compensation restriction of no more than two lakh of losses under the title deed from the house against your other income.
So from the above discussion, it is clear that there are several items of income that need to be included in our income tax return, but are omitted due to oversight or ignorance of legal provisions. I would advise all taxpayers to seek the help of a professional to file their ITR.
(The author is an expert on taxes and investments, and works as editor-in-chief of ApnaPaisa. Views are his).
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