The Top 5 Tax Filing Challenges and How to Overcome Them

Taxation is very crucial for any country and its economic development; therefore, taxpayers must participate wholeheartedly to pay the taxes and meet their legal liability. In India, income tax returns must be filed based on the source of income under various Income Tax Return forms like ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6, and ITR 7. Though the filing is facilitated by the government portal, filing the returns is not easy at all. Here, you will learn about the top 5 tax filing challenges and how to overcome them. 

Taxpayers should note that they do not need to file all the return forms, as it depends on the source of income. There are five heads of income as follows: salary, business and profession, Income from Capital Gains, house property, and Income from Other Sources. Filing income under the wrong heads and ITR forms is one of the most common mistakes that taxpayers make when they file the returns themselves. 

Incorrect ITR Form 

You might probably have made the mistake of filing an incorrect ITR form, then this is definitely for you. In case you do not know which ITR form you need to file based on the different sources of income, then reaching out to a tax professional is the most prudent solution for you. Individuals whose annual income is less than Rs 3 lakhs are not mandated to file the returns under the new tax regime. The basic exemption limit differs under the old regime, and it depends on the age of the taxpayer. Those whose income is less than the basic exemption limit can still file returns for benefits like easy access to loans and transparent records with the government. 

To overcome this tax challenge, taxpayers can go to a tax expert because having knowledge about all the ITR forms and sorting out which ITR form to file based on the income is difficult for commoners. In case those who have income from various other sources might find it much difficult, therefore, look

for an expert and delegate your liabilities. 

Ignoring Matching 26AS & TDS

It is important to keep Form 26AS and your ITRs in sync. The Form 26AS is a consolidated tax credit form that records the taxes paid on account of the taxpayer. These taxes can be in the form of TDS, TCS, advance tax, and self-assessment tax. The Income Tax Department uses the form to match the data filed by the taxpayer in their respective ITRs. Any mismatch may increase the tax liability and eliminate the refunds. In cases when TDS/TCS Rates is not reflected in Form 26AS, you will not be able to claim a credit for tax deductions. Therefore, make sure that all information is up to date. 

To overcome this challenge, taxpayers can ask the tax deductors and collectors to update the details so that they can claim the refunds or reduce the overall tax liability, as per the case. 

Not Filing by Due Date 

Taxpayers tend to delay File your ITR, and this delay results in missing the due date. Once you have missed the due date, penalties in the form of interest and late fees are imposed; therefore, make sure that the returns are filed by the due date. Individuals, HUFs, AOPs, and BOIs have to file the returns before 31st July (non-auditing cases). Those requiring an audit have to file it by the 31st of October. The due date to file revised or belated returns is the 31st of December. 

To overcome this challenge, taxpayers should not make more delay and file the returns before the due dates. 

Not Reporting All Sources of Income 

Not reporting all sources of income and filing the returns accordingly is a punishable offence, and therefore, stay away from such unethical practices. If taxpayers think of savings taxes, then try to optimize their taxes, not report it incorrectly. For tax optimization, claim deductions and exemptions allowed under several sections of the Income Tax. 

To overcome this challenge, taxpayers can reach out to an expert so that they can increase their savings through optimization and investments. This way, they will maintain transparency and comprehensive reporting as well. 

Not Responding Notices and Scrutiny from the IT Department 

The IT Department sends income tax notices and scrutiny letters to taxpayers who may be found at fault. These notices are very important, and you should comply with the rules. It is not always necessary that the department have serious issues to address, but sometimes it may need additional information from the taxpayers. 

To overcome this challenge, taxpayers must actively respond to the letters and notices and ensure that they are available for communication. Reaching out to an expert can also reduce the severity of the matter. 

Expert guidance assists you in compliance and ensures peace of mind. File your taxes hassle-free and set a clear record in front of the authorities. Reach out to TaxDunia, let our team of seasoned experts address the challenges.