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Essential incomes to include in your ITR: Don’t overlook these sources


When filing Income Tax Returns (ITR), specific incomes are often omitted due to ignorance or oversight, not deliberately. This article highlights crucial incomes that must be included in your ITR.

Many salaried individuals only disclose their salary income or provide Form 16 to their Chartered Accountant, assuming that interest on a savings account is entirely exempt. Moreover, since Tax Deducted at Source (TDS) has already been deducted on fixed deposit interest, they mistakenly believe it’s unnecessary to include it in their ITR.

Savings account interest

Although eligible for tax deduction under Section 80TTA/80TTB, savings account interest must first be included in your income, then the deduction can be claimed. The interest credited to your savings bank account is available from the income tax department through your Annual Information Statement (AIS). Failing to include this in your ITR may result in a notice from the tax department.

Fixed deposit interest

Banks deduct TDS on fixed deposit interest, but the TDS rate and your applicable tax slab rate may differ. Therefore, you need to include this interest in your income to discharge the balance tax liability or claim a refund. For instance, if TDS is deducted at 10%, but your slab rate is higher or lower, you must address the differential tax liability. Even if entitled to a refund, include the fixed deposit interest in your income.

Automatically renewed fixed deposits

Include interest on FDs renewed on maturity during the year, even if not reflected in your bank account.

Accrued income on NSC

If you follow the accrual basis of accounting, include accrued income on NSC purchased in previous years and interest on long-term fixed deposits in your ITR.

Mutual fund transactions

Switching units from one scheme to another within the same fund house is treated as a transfer under tax laws. This switching, often due to poor performance or a Systematic Transfer Plan (STP) mandate, may not reflect in your bank statement and can go unreported. Ensure profits or losses from switching transactions are disclosed to your Chartered Accountant. Tax rates differ for short-term and long-term gains, as well as for debt funds and equity-oriented funds. Verify mutual fund transaction details with your AIS and submit a modification request if discrepancies exist.

Income from minor children

Passive incomes earned by your minor child must be clubbed with the income of the parent with a higher income. Income up to ₹1500 per child is exempt annually; any amount over ₹1500 per child must be clubbed accordingly. Income earned by a minor due to their skills or efforts is taxed in the child’s hands and doesn’t require clubbing. Clubbing also doesn’t apply if the child has specified disabilities.

Gifts and benefits in business

In the era of business promotion through discounts and gifts, tangible gifts or foreign trips as incentives from business associates are taxable.

Including all relevant incomes in your ITR ensures compliance and avoids potential penalties. Always cross-check your financial activities and seek professional advice when in doubt.

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