Tempting mistakes while filing the Income Tax return

Some of the cases where taxpayers ‘took chance’ while filing the returns are listed below. Check whether you have done these ‘tempting mistakes’!

Salary from two employers – Mr.Prasanna had worked in Selfie Software till August 2014, before he joined Centura Techno. Thus for the Financial Year 2014-15, he has earned salary income from two employers. While filing the income tax return, he declared the salary from the present employer (Centura Techno) only.

Recommended Read: “Filing of IT return if you have Salary income received from two different company in the same year


No consultant is required to tell that Mr.Prasanna is wrong! Now the question is can the department track this?

  • Central Processing Centre (CPC) – at CPC while processing the income tax return, they can identify the mistake, if both the employers have done TDS.
  • Scrutiny Assessment – If TDS is not done by one of the employers (earlier employer), then it is not possible to track the error by CPC. However, if the case is taken up for scrutiny assessment, the Officer can trace the mistake.


Deductions u/s 80C – Mr. Prabhakar has declared Rs.90000 as investment in Fixed Deposit and claimed deduction u/s 80C. However, he failed to make any investment during the previous year. Will the department come to know about it?

Generally No! There is no proof to be provided while filing income tax return. CPC will not be able to trace the investment details through IT return or otherwise. It’s only if the case is picked up for scrutiny assessment that the Officer may ask for the proof.


Interest on Savings Bank Account – Mrs. Prema has earned Rs.34000 in Savings Bank Account as interest for the year 2014-15. While filing her return, she has not declared the same. Is this fine? Will income tax department come to know about it?

Again in this case also, CPC won’t come to know as there won’t be any TDS by banker on Interest of Savings Bank Account. It’s only at the time of scrutiny assessment that the Officer can trace this error.


Tax rate on Short Term Capital Gain – Debt Fund

Sale of Equity oriented mutual fund after 12 months of holding is exempt from tax. Whereas Sale of Debt oriented mutual fund after 12 months but before 36 months attracts normal rate of tax as per the tax slab of the taxpayer (say, 10.3% or 20.6% or 30.9%). So, it is tempting to show the sale of debt funds as sale of equity funds! By doing so, one can save a lot of tax!

Will the department come to know about it? Again, unless the case is taken up for scrutiny, they can’t track it.


Interest earned on deposit in Minor children or Spouse name

Mr. Parameshwar is the sole earning member of the family. He has kept Rs.500000 Fixed Deposit in his wife’s name and Rs.300000 in his son’s name (son is a minor). While filing the return, he has not declared the interest earned on these deposits as income.

Any income earned by minor son and the spouse has to be clubbed with the income of the earning member (in this case Mr. Parameshwar’s). Now that he has not done, will income tax department come behind him?

Not really. The department can catch him if they take up his case for scrutiny.


Sale of immovable property

Mr. Partha has sold a residential site at Rajarajeshwarinagar for Rs.28 Lakhs. While filing his return, he failed to report the same. Will the department come to know about it?

Sub-Registrar’s Office is obliged to give an information of all transactions worth Rs.30 Lakhs and above in the form of Annual Information Report (AIR). In this case, it is Rs.28 Lakhs and may not get reported! So, chance of taking this case for scrutiny is very less.


Rental Income

Mr. Praveen has let out a house at Viveknagar for a monthly rent of Rs.12000. He is receiving the amount in cash from the tenant. He has not shared his PAN details with the tenant. Can he avoid paying tax on such income?

He has not left any proof/clue to the department to trace this income! Suppose, he had given PAN details or rent receipt to the tenant or accepted the rent through cheque, the department could have traced this income while scrutinizing the documents during the assessment.


Now the final question is – ‘?

As a professional, my advice is ‘Strictly No’.


But, shall I take a chance by not declaring certain income?’ You may also ask a supplementary question, what is the chance/probability of the department taking up the case for scrutiny?

The total number of IT returns filed with the department per year is around 3.5 Crores and of which, around 3 to 4 Lakh cases will be taken up for scrutiny. So, you can calculate the probability!


Recommended Read: “The day you get brown colour envelope


“What happens if I get caught? your next question.

This is the catch. If they track that you have missed reporting income, then you will end up in paying Taxes + Interest + Penalty. The applicable interest will around 22% per year. The penalty may go up to 300% of taxes.

Now, you can decide whether you want to evade the taxes and take chances!

It is always worthwhile to pay the taxes correctly and sleep peacefully.

We hope this article help you and file income tax return for the Asst year 2015-16 immediately to avoid last minute rush. You may want to read What one should know about filing income tax return in India before filing return


Thought for the day

Set peace of mind as your highest goal and organize your life around it.

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at simplifiedlaws20@gmail.com

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