Income tax returns (ITR) filing: Top mistakes that can be very costly
Income tax returns (ITR) filing: Tax planning is a continuous and meticulous process. It is always advisable to keep things in order before the tax filing season begins. For many, tax planning is no less than a nightmare. Although, it is a continuous process, but many are found scrambling towards the end of the financial year to do last minute documentation and meet the March 31st tax filing deadline. To avoid unnecessary worries and mistakes, it is better to keep things in order and be organised before the tax filing season begins.
Paying Health Insurance Premium In Cash
Tax deduction under Sec 80 (D) allows an individual to lower the taxable income by Rs 25,000 (for non-senior citizens). This deduction can be claimed for Health Insurance premiums paid for self, spouse, children and parents but only if the premium is paid through a non-cash mode such as Cheque, online etc. In the last-minute rush, people often make the mistake of paying through cash and so end up paying higher tax despite buying ahealth policy. This should be avoided to avail the benefit under Sec 80 (D).
Documents Not In Order
You should keep all your documents in order so that you don’t miss on mentioning important financial transactions, which are eligible for tax benefit. At the time of filing the ITR you may need these document, and thereafter such documents can be used as a proof if a clarification is sought. While filing ITR you may need documents such as PAN and Aadhaar card details, statement of all your bank accounts, TDS certificate, form 16, pension certificate, salary slips, rent agreement, rent receipts, travel related bills, interest earned from bank accounts and investments etc.
Investing In Non-Tax Saving Instruments
Your Investment should not be based on hearsay. If your investment goal is to earn good returns as well as save tax, then you must be well versed about the instruments you are investing in. It is wise to consult your tax advisor for an appropriate instrument, depending on your requirements. For example, ELSS wins as a tax saving bet over an investment in SIP in equity fund.
Waiting For Tax Saving Investment Till Last Minute
Some people do not plan tax saving in advance and invest in any available tax saving instrument in the last minute. This may result in selection of inefficient tax saving product along with putting a financial burden to arrange funds. You should plan and invest money to save tax from the beginning of the financial year. It gives you flexibility and also better options to select appropriate tax saving products.
Tax Saving Not In Sync With Financial Planning
Tax saving steps must be taken in sync with financial planning. For example, you require a fund to accomplish a financial goal after 3 years, but you overlook this requirement and invest money in PPF or NPS to save tax, which carry a longer lock-in period. So, you should consider liquidity, return, risk and other aspects in sync with your financial objectives before you make a decision to invest and save tax.
You must focus on tax saving options at regular intervalsand avoid considering it as one-time process. Try to file the tax well before the last date to avoid penalty and do not hesitate to consult with your tax consultant if you have any confusion.