Online filing of tax returns is fine but you still need expert help

It’s the time of the year again when you file your income tax returns. Over the last three years, the Income Tax authorities have introduced e-filing or online filing of tax returns. Little wonder, then, that several such do-it-yourself sites from taxsmile.com to the recent myitreturn.com have come up.

What does e-filing entail? You have to download the appropriate return form from the Income Tax website or tax return sites. After filling this, you need to register on the Income Tax website, and upload the form in XML format.

On uploading it, you’ll get an acknowledgement cum verification or ITR-V form. If the return is digitally signed, the acknowledgement — print a copy for your records — completes the filing process. If it’s not digitally signed, you must print and fill the ITR-V form, and submit it at your local income tax office within 15 days.

How effective is e-filing? Well, says tax expert Sandeep Shanbhag, director, Wonderland Consultants: “If you’ve a medical problem, you’d go to a doctor. Why self-medicate, especially when the charges are so nominal?” If you have to do it yourself, the best site is the government’s https://incometaxindiaefiling.gov.in, he says.

Adds Vivek Desai, proprietor, N.N. Desai & Co, a Mumbai-based tax firm, “The sites are okay for people who’re already filing their returns and know how to do so. For the fact is that our Income Tax Act is not simple.”

That’s because not everyone is aware of the Act’s intricacies. Also, the Saral form was replaced last year with a more comprehensive but complex form. “The most common mistake is to think you can do it yourself. Because unlike, say, a mutual fund form, even a small error can have dramatic consequences,” says Shanbhag.

After all, for most assessees, it’s not a case of simple salaried income alone. There may be capital gains and losses, interest income or income from property to account for. Take long-term capital gains tax. “Most people think since it’s not there on equities, you needn’t show it. But you have to enter the gains,” says Shanbhag.

Or take dividends from listed companies that have paid dividend distribution tax that are tax-free in the hands of the assessee. But dividends where the securities transaction tax hasn’t been paid are taxable. Now, an assessee may club all dividends together. “If you don’t know these things, the computer can’t help you,” says Desai.

What’s more, the form isn’t descriptive but will ask you to state, for instance, income from Section 10 (38). “You need to know the Act to know this refers to long-term capital gains,” says Shanbhag.

Another common mistake, he adds, is that people assume only salaried persons need to pay advance tax. But that’s not the case. For instance, if you’ve earned capital gains in November, you have to pay advance tax on it by December 15, else from December to March, you’ll have to pay interest on it.

Take even day trading. “There’s the risk of income from trading being treated as business income. Assessees need to be careful about such things,” says Desai.

Clearly, filing returns isn’t as simple as the finance ministry would make it out to be.