Common Mistakes while filing income tax return - Omitting bank interest, income, capital gain, Credit Card Spending, Cash deposit, Part of Income

At the time of filing income tax return we may think that everything is perfect. But there are different kinds of mistakes people commit while filing income tax return. It may be intentional for small benefit or un intentional mistake or omission. But these kinds of omission or mistake may prove costly later. Some of the common mistakes while filing income tax return are:

Omitting Bank Interest from Saving Bank Account or FDR
This is a most common mistake and most of the assesses do not like to include their interest income while computing tax. Some assesses believe that bank have already deducted tax on interest then what is the need of including such income. This argument is ok when the tax slab of the assessee is in 10%. If it is in 20% or 30% slab the assessee will have to deposit balance tax after deducting TDS. It is important to show complete income in the income tax return.

The other situation is omitting interest received from savings bank account. Income tax department know that the assessee will definitely get interest on the balance in savings bank account. If you are not showing any interest income, that itself will create doubt.

Omitting interest from few bank accounts
Some assesses show only one or two of their bank account income in the income tax return and like to hide other bank accounts. Now everything is computerized and it is safe to show your entire income in the tax return.

Cash Deposit
If you have deposited huge amount of cash in your account, you must have clear proof about the source of income. If you deposit cash into your account on behalf of any other family member or other person, proper evidence should be kept.

Credit Card Spending
If you have a habit of spending through credit cards, proper records of bills and payments should be kept. Your spending should be justifiable with your source of income and amount shown in tax return.

Investment in Shares
If you have invested huge amount in share market, proper income tax return should be filed and the records should be kept properly.

Investment in Shares
If you have invested huge amount in share market, proper income tax return should be filed and the records should be kept properly.

Sale of Property and Capital Gain
In most of the cases people do not want to show the sale proceeds of property and pay capital gain tax. But it is a very dangerous decision. Capital gain tax can be saved with proper planning. Amount of sale proceeds should be kept in bank account as per the existing law. Purchase of another property can be done within next two years and construction can be done within next 3 years. Capital gain tax can also be saved by investing in the eligible schemes.

Claiming Expenses but cash withdrawals are not there
Some assesses claim expenses against their income and there will not have any cash withdrawal from the bank account. This will clearly show that there is no spending against such expenses claimed. So every claim of expenses should be supported with proper billing.

Omitting part of Income
Some assesses show only part of their income in the income tax return. They some times omit cash transactions. The other party may be keeping the record of payments made. So it is better to show complete transactions in the income tax return.

Claiming same expenses in different returns
Some assesses claim same expenses in their personal return and business return. This is wrong. Every expense should be supported with proper evidence.

Filing Income tax return without comparing form 26AS
Always compare your tax deduction data with form No. 26AS available online. There may be differences in your record and form No. 26AS due to the mistake in filing of TDS return by the person deducted tax.

Filing return by using improper form
Always file your income tax return by using proper return form. Wrong from may send wrong data and may create tax liability.

Pay tax on time
Paying of advance tax and self assessment tax in time will avoid interest liability and penalty.

Late filing of Return
Always file the income tax return in time. Late filing will attract interest, fine penalty etc. And the return filed late cannot be revised.