Less Known Cons of Pre-Filled Income Tax Return

A pre-filled income tax return was introduced in order to make the tax compliance process convenient. However, it can cause some problems for the taxpayers. In this article, we will discuss a few cons of a pre-filled income tax return.

Previously, a taxpayer’s pre-filled income tax return informed the government about his/her income, tax payments and tax deducted at source (TDS). However, now it will also provide information on dividend income, capital gains on listed stocks, and interest income from post offices, banks, and other sources.

Depositories are required to submit details of capital gains on listed securities. They will have to do it on a first-in, first-out (FIFO) basis. They are required to take the IPO cost or off-market transactions at zero. For on-market transactions, the sale price needs to be taken at day-end rates.

Furthermore, share transfer agents and registrars must report details of capital gains on mutual funds. The information must be reported by 31 May. Thus, a taxpayer’s pre-filled return will not be available on the tax department’s website. He/she can’t file his/her tax return. This information will also be provided in Form 26AS in the taxpayer’s e-filing account.

Every company (unlisted and listed) will be required to submit information of the aggregate of dividend provided by the company taxpayer-wise in the year. Furthermore, banks, deposit-accepting registered non-banking financial companies, and post offices must provide information on interest paid or credited to a taxpayer if the interest is over Rs. 5,000 in the year.

What Happens in case there is a Mistake in the Information?

The entities are required to submit a copy of the information filed with the tax department to you. However, it can be a problem if there is a mistake in the information filled.

If there is a mistake in the capital gains of listed securities, then you can rectify the sale rates or purchase while filing your income tax returns. However, there isn’t a lot of information on how to rectify other mistakes. In such a case, you will have to discuss it with the entity.

If the mistakes aren’t rectified quickly, then it can be a problem for many taxpayers. Furthermore, there isn’t any provision for extension of the due date for filing the income tax return if a taxpayer is facing delay due to such a mistake.

In case a taxpayer rectifies the information in the income tax returns, then also he/she can face a problem. He/she can get selected for limited scrutiny or verification. Thus, the taxpayer must suffer due to a mistake he/she hasn’t made.

Now, the taxpayers must collect information for their tax returns as well as check for mistakes in the pre-filled information. It can be a big problem in case of capital gains on listed shares. This is because there might be a difference in most of the numbers as day-end rates are used. Furthermore, other exchange charges and brokerage aren’t entered in the pre-filled information. This will make the process difficult for many taxpayers.