ITR Filing 2023: Small Mistakes Salaried Taxpayers Should Avoid When Filing Tax Returns

Salaried taxpayers often have misconceptions about the tax return filing process. Many think that because their employer has been deducting tax from the source, they have the easiest process when filing their returns. This results in small mistakes that could have undesirable consequences, the least of which is a notice from the tax department.

There are times when the taxpayer thinks that only big amounts matter when it comes to filing their tax returns. On the contrary, every income, no matter how small, must be disclosed in the returns.

With that in mind, the taxpayer must make the effort to take note of various types of income earned. This must then be mentioned clearly.

Many times, people ignore income—sometimes as low as Rs 1,000—leading to a mismatch with the information available with the tax department, and a notice is sent asking the taxpayer to explain it.

The big misconception among the salaried is that there is no additional amount that needs to be paid by them in the form of taxes because all the liabilities are cleared through the 'tax deduction at source' by the employer. This is not correct, because the tax payment is only with respect to the income that is earned from salaries or that has been disclosed to the employer.

For this income, the entire tax is paid, but there is often more or additional income that a person can have from other sources. This can include things like interest on deposits, dividends, and even interest on income tax refunds.

If this is the case, then there would be a tax liability arising from this extra amount. Missing out on the tax paid will lead to a demand notice when the assessment is made by the tax officer due to the discrepancy.

Sometimes, there is also a misconception among taxpayers that if there is TDS on a particular income, then there is nothing more to be done because the tax has been paid. This is not correct because the rate of the TDS matters. For example, when it comes to bank fixed deposits, the interest earned is taxable, and the bank will deduct TDS at 10% on this when it exceeds a certain figure. The taxpayer, on the other hand, might be in the 30% bracket, and hence, for them, there is still some tax that has to be paid due to the difference in rates. This will lead to an outstanding tax bill for the taxpayer.

This kind of situation should not be allowed to fester and has to be taken care of because, along with the tax to be paid, interest will also be levied for the shortfall, which will increase the total outstanding dues to the tax department.

One thing that a lot of people think is that because they do not have a tax liability, there is no need to file returns. There are various conditions under which a person has to file a return, and in many cases, in order to get a refund, they have to do it.

There is even a possibility that the tax department will send a notice in the event of not filing returns. What’s more, even if there is no tax due, regular filing of returns creates a record of income earned, which is useful in many other areas. Applying for visas to certain countries, for example, becomes much easier.

Arnav Pandya is founder of Moneyeduschool