Filing the income tax returns is a cumbersome process and requires alertness to make it an error free experience. If you commit any mistake while filing the returns, you may end up getting a notice from the income tax department. After the filing process is over, no one likes to get involved into the technical process of responding to the I-T notices.
Although the income tax returns (ITR) filing season is over, it has left with some useful lessons for the taxpayers to follow in future. If you take note of these lessonsseriously, then you may avoid falling into I-T radar.
Let us take a look at some important lessons that you can learn from this year’s ITR filing process.
Plan your tax saving investment in advance
Last minute tax saving investment can force you to invest in low return avenues, but if you plan it in advance, then you can save the tax efficiently and also earn attractive return on it. You should learn from the last tax filing experience that the tax planning starts from the first day of the financial year. Another benefit of early tax planning is that you get ample time to invest and you don’t need to stress your liquidity all of a sudden. By investing regularly from the starting of the financial year, you get more chance to average out the investment and lower the risk.
Keep Your Documents Handy
It is important to maintain record of your transactions and keep the documents handy. This will help smoothen your filing process and save you from the last minute chaos.
This year ITR filing period came post demonetisation and GST implementation. The government had sought a declaration from the taxpayer if a deposition of over Rs2 lakh cash was made in the bank account during the demonetisation period. It was a smooth sail for people who had all the documents in place while filing the ITR, however those who couldn’t furnish the documents had some tough moments. Therefore, you must not wait till the last day to file the ITR.
Note the details of cash transactions
Post demonetisation, the government is promoting digital transactions, while discouraging cash transactions. It is difficult for you to remember the details of all the cash transactions, however the I-T department is keeping a close watch on all your big cash transactions. It is thus advisable to keep proper record of all your cash transactions.
Declaring all bank accounts
This year it was mandatory to declare all your bank accounts except the dormant accounts. Many people often open several bank accounts without any reason while transacting only through a few accounts. It is not only difficult but confusing to remember too many bank accounts. Since, filing the returns requires your bank’s annual statement, try to restrict number of bank accounts to avoid last minute confusion.
Stay updated with new ITR rules
It is not necessary that the ITR rules of this year would remain same for the next year too. Keep your eyes and ears open for any kind of change in the ITR filing rules as the I-T department always notifies about the updated rules. For instance, last year it was not mandatory to furnish all your bank accounts, but this year it was made compulsory. There was no demonetisation related details required last year, but this year it is one of the most important aspect of income tax filing.
Learning is a continuous process and if you learn from your recent ITR filing process, then it can save you from penalties that the I-T department could levy in case you miss something.Do not conceal information, stay updated, file your ITR on time and do not forget to verify it.
(The writer is CEO, BankBazaar.com)