Tax-Saving Mistakes to Avoid as a Salaried Employee While Filing Returns
As a salaried employee, filing your income tax returns accurately and on time is important. Filing your taxes can be complicated and time-consuming, but it’s worth it in the long run. However, there are some tax-saving mistakes that you should avoid while filing returns to make sure you’re not overpaying or underpaying taxes.
Mistake #1: Not Claiming Tax Deductions
One of the biggest tax-saving mistakes you can make is not claiming tax deductions. As a salaried employee, you’re entitled to various deductions that reduce your taxable income and lower your tax liability. Some common tax deductions that you can claim include:
- Section 80C deductions for investments such as PPF, NSC, life insurance premiums, and ELSS.
- Deductions under Section 80D for health insurance premiums
- Deductions under Section 80E for education loan repayments
- Deductions under Section 80TTA for interest earned on a savings account
Mistake #2: Not Checking Form 26AS
Form 26AS is a tax credit statement that contains details of taxes deducted on your behalf and taxes paid by you. It’s important to check your Form 26AS before filing your tax returns to ensure all your taxes have been correctly credited to your account. If there are any discrepancies, you should bring them to the attention of your employer or the tax department.
Mistake #3: Not Filing Returns on Time
Another common tax-saving mistake salaried employees make is not filing their tax returns on time. Filing your tax returns after the due date can attract a penalty of up to Rs. 10,000, which can be avoided by filing the returns before the deadline. The due date for filing tax returns for salaried employees is usually July 31st of each year, but it’s always a good idea to check the latest deadline.
Mistake #4: Not Reporting All Income
All income you earn during the financial year, including salary, bonuses, and other perks, should be reported in your tax returns. Not reporting all income can attract penalties and even legal action. It’s important to keep track of all income earned, even from a part-time job or freelance work, and report it accurately in your tax returns.
Mistake #5: Not Disclosing Assets
Salaried employees should also disclose all their assets, including bank accounts, investments, and properties, in their tax returns. Not disclosing assets can also attract penalties and legal action. It’s important to be transparent and accurate while disclosing assets to avoid issues with the tax department.
Mistake #6: Not Taking Professional Help
Filing tax returns can be a complex process, and it’s easy to make mistakes. It’s always a good idea to seek professional help from a tax consultant or a loan agent to ensure your tax returns are filed accurately and on time. A loan agent can also help you with tax-saving investments, such as home loans and education loans, which can reduce your taxable income.
Mistake #7: Not Reviewing Form 16
Form 16 is a certificate issued by your employer that contains details of your salary, taxes deducted, and other allowances. It’s important to review your Form 16 before filing your tax returns to ensure that all the information matches your records. If there are any discrepancies, you should bring them to the attention of your employer or the tax department.
Mistake #8: Not Utilizing Tax-Saving Investments
As a salaried employee, there are various tax-saving investments that you can utilize to reduce your taxable income and lower your tax liability. Not utilizing these investments can result in higher taxes and a missed opportunity for savings. Some common tax-saving investments include:
- Public Provident Fund (PPF)
- National Pension System (NPS)
- Equity-Linked Saving Scheme (ELSS)
- Tax-saving Fixed Deposits (FD)
It’s important to research and choose tax-saving investments that suit your financial goals and risk appetite and make sure to invest before the end of the financial year to avail the tax benefits.
Avoiding these tax-saving mistakes can help you file your tax returns accurately and on time and save you money in the long run. It’s important to keep track of all income, claim tax deductions, disclose assets, and seek professional help if needed. By following these guidelines, you can ensure you’re paying the right amount of taxes and avoiding penalties or legal issues.