The extension in due-date to file income tax returns for the previous year 2017-18 has come as a welcome relief to many taxpayers across the country. This gives us time to compute our gross total income in a more comprehensive and detailed manner, so that no income gets left out while computing the taxes. However there may be some incomes which may inadvertently get omitted either due to ignorance or lack of information of the taxpayer. In this article I have attempted to highlight few such incomes which are taxable but are likely to be missed out due to ignorance.
Income earned on investment of minor child
As per the provisions of Income Tax Act 1961, the income earned by a minor child is required to be included in the income of the parent whose income is taxable. Parents normally invest money belonging to their minor children received as gift on several occasions, in savings accounts, recurring deposit account bank fixed deposits or mutual funds. The interest/dividend earned by the minor on these investments is required to be included in the income of the parent. However, please note that only income in excess of Rs 1500 only is taxable in the hand of the parent and any income derived by each minor up to Rs 1,500 is exempt from tax.
Capital Gains on units of mutual funds
At times due to below par performance of your investments in any scheme of mutual fund, you tend to switch these funds to units under other scheme of the same mutual fund. Since the units are of the same mutual funds but of different scheme, this do not get reflected in the bank account and may get missed out while computing your taxes.The switch effected by you may be in respect of units held for less than a year or for more than a year. The profit or loss on short-term units and long-term units entail different tax treatment. Even tax treatment is different between debt fund and equity oriented funds. Disclose such switch over transaction in your tax return for proper and correct treatment of profit or loss on switch of such units.
Notional income in respect of more than one house property
Under the provisions of Income Tax Act, you do not have to pay any tax in respect of a house property which is occupied by yourself or your family members. This tax benefit is available only in respect of one residential house property. However, in case you own more than one house property and all are occupied by you, you have to exercise an option to treat one of the house as self-occupied for the purpose of income tax and offer notional income in respect of the other house/s. Majority of the taxpayers are under the impression that since no rent is received by them, they are not liable to pay any tax on the second house property.
In case the second house is let out, rent received in respect of that house is anyway offered for taxation. However, in case both the houses are self-occupied by you, ensure that you offer a notional income in respect of one house chosen by you asdeemed to be let out. The income to be offered for tax is reasonable expected rent in respect of such property.
Interest received on bank savings account and fixed deposits
There are other incomes too which people normally consider as non-taxable and one of these incomes is interest on savings bank account. Earlier there used to be deduction available under Section 80L in respect of bank interest and therefore this income was not shown at all. But this is not the case now but people still carry this notion and omit to offer interest on saving bank for taxation. Now an individual/HUF can claim deduction u/s 80TTA for interest on savings account upto Rs 10,000. A higher deduction upto Rs 50,000 is allowed to super senior citizen u/s 80TTB wef assessment year 2019-20 in respect to interest on savings, fixed deposit or any other interest. So the assesse should first include this interest in their total income and then claim deduction.
The other items which are normally not included by the tax payers under their income is interest received on bank Fixed Deposits (FD) presuming that since TDS has already been deducted by the bank, there is no need to offer it for tax. Please bear in mind that though tax is deducted at source on interest paid on bank FD, the rate at which TDS is deducted and the rate which is normally applicable in your case could be different. The tax is deducted @ 10% where as your marginal rate of tax may be 20% or 30%. It is your liability to pay the difference between the tax already deducted and the rate at which you are liable to pay tax.
So as you gear up to file your returns for this assessment year, ensure that you include all your incomes for the year, so that nothing gets left for chance.
