New Delhi: The last date to file income tax return (ITR) for 2016-17 fiscal or assessment year 2017-18 is coming to end on Saturday.
In view of the difficulties faced by taxpayers in e-filing their returns before July 31, the Central Board of Direct Taxes (CBDT) had extended the date for filing Income Tax Returns (ITRs) by August 5 (today).
While filing your income tax this year you can keep in mind a few important tax saving instruments that will not only constrain your returns but also help you build wealth over the long term.
Chetan Chandak, Head of Tax research, H&R Block India in conversation with Zee Media elaborates on these 6 investments for tax-free income.
Equity-Linked Savings Schemes
Equity-Linked Savings Schemes (ELSS) is the best tax saving investment option as it has the potential to provide you highest return in the category. Though it carries the market risk, which to a certain extent is neutralised with a lock-in period of three years (minimum in the category), through the SIP mode of investment, one can further reduce the risk.
Public Provident Fund
Public Provident Fund (PPF) is considered as one of the safest long-term tax saving instrument which earns a taxfree return of 7.9 percent. This is a lot better than taxable FD interest. It can also fetch tax deduction up to Rs 1.5 Lakh u/s 80C. So effective post tax returns (factoring in tax deduction) for a person in highest tax bracket comes to 12.25 percent.
Both Life Insurance and Medical Insurance Plan are very good tax saving instruments providing you dual benefit of, protection against eventualities and tax saving u/s 80C and 80D respectively. But one should not mix insurance with investment and should prefer Pure Term Insurance Plan for security. For investment, there are many better options available.
Sukanya Samriddhi Yojana
Sukanya Samriddhi Yojana is one of the best tax saving options for those who wish to invest for the future of their girl child less than ten years of age. It provides you with the tax-free interest of 8.4 percent with a tax deduction of up to Rs 1.5L under 80C. Maximum yearly deposit of Rs. 1.5 Lakh can be made for 14 years with a maturity of 21 years. Withdrawals from the scheme are tax exempt, and 50% of the corpus can be withdrawn once the child turns 18.
NPS (New Pension Scheme)
New Pension Scheme (NPS) is an excellent tax saving investment option for those who are planning a long term corpus to fund their retirement. It has potential to provide you returns comparable with any ELSS scheme as both invest in equity and debt instruments only. But NPS has substantially low fund management charges as compared to ELLS maximizing your returns. Further, it can provide you additional deduction u/s 80CCD (1B) up to Rs 50,000 which is over and above Rs. 1.5 lakh under 80C. The only downside is the investment gets locked in till retirement age, and the rate at which the annuity will be fixed is also not sure.
SCSS (Senior Citizens Saving Schemes)
Senior Citizens Saving Schemes (SCSS) is one of the best tax saving instruments for senior citizens who wish to earn a good return on their investment without any risk as well as want to claim the deduction u/s. 80C. It provides taxable interest of 8.4 percent which is paid on a quarterly basis providing regular income. One can invest maximum 15 lakh for an initial period of 5 years which can be further extended for three years. The option of premature closure is available after one year.
10 common mistakes that you must avoid while filing ITR
Filing of income tax return –the annual ritual –can get really troublesome if you don’t pay heed to the details. Every year, numerous applications get rejected due to incorrect or mismatched information.
This is the reason why you should not make any mistakes on your application, especially if you are e-filing for returns for the first time.
Vikas Dahiya, Founder and CEO of All India ITR in conversation with Zee Media has given a list of common mistakes you should avoid while e-filing your Income Tax Returns.
2. Delaying e-verification on return
Until the returns are verified, the procedure of filing for returns remains incomplete. Taxpayers have two options for verifying the returns;
– Either sending the Income Tax Returns Verification acknowledgment to CPC, Bangalore within 120 days of filing the returns.
– Or an easier option would be, e -verifying your returns online. There will be no requirements to send the ITR V if you e-verify the returns online. The procedure of e-verification can be done via net banking, Demat account, Aadhaar number and bank account number.
3. Filling the form with incorrect personal details
To be eligible for e-filing benefits you must first register on the official website of the Income Tax Department. To achieve a flawless e-filing process you must furnish the accurate personal details like your postal address, date of birth, status, email ID, mobile number etc.
It is also pivotal to make sure that your details are filled correctly in their designated columns. Any mistakes in your date of birth will result in you falling in the higher tax slab. The registration process can be tricky if you aren’t familiar with the norms and any incorrect information may lead to issues in the future.
4. Errors in your banking particulars
Even if claiming for refunds is not applicable to you, it is mandatory to furnish your bank account details. While e-filing, always double check to see if the name, account number, IFSC and MICR code of your bank account matches the credentials entered in the registration portal.
5. Failing to report all the bank accounts
Many people neglect this provision and fail to declare all their bank accounts which have been functional within that financial year. This practice is illegal as the Income Tax Department has clearly stated under its act that every taxpayer must mandatorily submit all the bank accounts registered in the name of the taxpayer. Also, if you have made a cash deposit of more than Rs 2 Lakh during the demonetization period (November 9, 2016-December 30, 2016), you must fill a specified column in the e-form to report the cash deposited.
6. Overlooking the differences in TDS figures while e-filing
If you do not pay attention to details then your application for returns will become invalid. Be sure to verify that the figures of TDS made on your income is reflected in form 26AS and it matches. Form 26AS will also verify the fact on the instance when your employer has made TDS from your income but hasn’t submitted the same to the Income Tax Department.
7. Providing wrong financial data
One of the biggest reasons for rejection of returns while e-filing is when your salary details contradict the TDS. Income from other sources such as house property income, short-term capital gains etc. should be clearly stated. There will be a lot of precision that needs to be met while submitting the credentials of your financial data so it is best to seek the console of tax specialists.
8. Not reporting exempted income
The previous ITR forms consisted of a single column where you must report the income that has been exempted from taxation. The new forms, however, have been aligned with different columns where reports of exemption on dividend income and long-term capital gains must be mentioned specifically.
9. E-Filing for claims by submitting the wrong form
A lot of changes have been made on the ITR forms this year. Out of the total 7 ITR forms, you must make sure that you choose the one which is applicable as per your income type. For instance, last year ITR-4 was applicable for those having income from the business but this year ITR-3 is the form applicable for business entities. As a taxpayer, you must keep yourself updated on such changes while e-filing or else the Income Tax Department will reject a wrongly filled form.
10. Failing to Notice the mistake in income calculation
To determine an accurate calculation of your income you must fill the complete form carefully in its right column while e-filing. If the computation results in a different figure from what you have entered in your form then check to verify which will be the correct figure and enter that in the form.