ITR filing: Know the income tax implications of unreported incomes here

Specific incomes are generally not included while filing the ITR due to ignorance or oversight, not deliberately. This article deals with the incomes omitted that are to be included in the ITR.

Saving Bank account and Fixed Deposit interest

While filing the ITR, salaried people generally disclose their salary income only or provide form No. 16 to their Chartered Accountant, presuming that interest on the savings account is fully exempt. As TDS has already been deducted on fixed deposit interest, it is unnecessary to include it again in their ITR.

Though interest on a savings account is eligible for tax deduction under Section 80TTA/80TTB, even if the amount of interest on a savings bank account is less than the amount of deduction available, you are still required first to include it in your income and then claim deduction u/s 80 TTA/80TTB. The details of interest credited during the year to your savings bank account are available from the income tax department and are now available to you through your AIS. So, if you do not include the same in your ITR, you will probably get a notice from the income tax department.

Similarly, though the banks deduct tax on fixed deposit interest, the TDS and tax slab rates applicable to you may differ. Hence, you need to include it in your income and discharge the balance tax liability or claim a refund, as the case may be. For example, though the tax is deducted @ 10%, the slab rate applicable to you may be lower or higher than this. It is your liability to discharge the differential tax liability. Even if you are entitled to a refund, you must still include the fixed deposit interest in your income.

For the fixed deposits that have been automatically renewed on maturity during the year and thus are not reflected in your bank account, you might omit to include interest on such renewed FD in your ITR, which is incorrect.You should also include the accrued income on NSC purchased in the earlier years and the interest on fixed deposits of longer tenure in your ITR if you follow the accrual basis of accounting for interest income.

Capital gains in respect of units of mutual funds switched during the year

Any switching of units from one scheme to another scheme of the same fund house is treated as a transfer under the tax laws. Such direct switching between the schemes of the same fund house does not get reflected in your bank statement, and thus, any profit or loss made on such switching may go unreported.

The switching may happen due to a scheme's poor performance or the Systematic Transfer Plan (STP) mandate given to the fund house. The profit/loss on switching units may be short-term or long-term, entailing different tax rates.

Even tax treatment for debt funds is different from equity-oriented funds. Ensure that profits/losses from such switching transactions are disclosed to your chartered accountant for proper and correct treatment. Please verify the details of your mutual fund transaction with AIS and submit a modification request if there is a discrepancy.

Income of minor child

All passive incomes earned by your minor child must be clubbed with the income of the parent with a higher income. As income up to Rs1500 per child is exempt annually, the amount over ₹1500 for each minor child will be clubbed as required.

Please note that income received by a minor due to his skills or efforts is not required to be included and is taxed in the child's hands. Clubbing is also not applicable if the child is suffering from some specified disabilities.

Gifts or other benefits received by you in case you are carrying on business

This is the age of business promotion through discounts and gifts to the customer and business partners. A few of you might have benefited from tangible and valuable gifts from your business associates. Some of you must have also enjoyed foreign trips as incentives. Since such items are taxable, they are not reflected in your books of accounts and thus may go unreported. Please disclose this to your chartered accountant to ensure full compliance.

The above discussion will help you better comply with the law.

Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and on @jainbalwant on Twitter.