Income tax

Employee tax return: 5 common problems and their solutions explained

Filing of income tax return (ITR) is a must for salaried employees with an annual income above Rs 2.5 lakh. The income tax rules contain several provisions through which employees can reduce their overall tax expenditures. However, we see that many employees do not take full advantage of these tax-saving measures. This article explains five common employee issues and their solutions.

Lack of knowledge of available deductions

Many wage earners are unaware of the deductions available to them beyond Section 80C income tax. “Therefore, tax planning awareness should be created for the following deductions i.e. 80CCD(1B)/80D/80E/80EEA/80EEB/80G/80TTA/80TTB/80U to reduce tax liability “, says Sujit Bangar, founder of Taxbuddy.com.

Less TDS deducted due to multiple Form 16s

Each time an employee changes jobs, the employer claims the standard deduction and basic exemption due to which the TDS is deducted less and the employee ends up paying the self-assessment tax with interest at the time of filing the declaration.

“To overcome this employee, he must report the income earned from the previous employer to his current employer so that it is also reflected in the Form 16 and therefore the TDS is deducted,” explains Bangar.

Read also : How is the tax on rental income calculated?

Not able to qualify for HRA (House Rent Allowance) tax relief

Many employees often fail to submit HRA documents to their employers in a timely manner. Therefore, the employer does not take into account the HRA exemption when calculating the tax payable, which in turn leads to a higher deduction of TDS throughout the year. According to tax experts, employees should take the following steps to avoid such a scenario:

  • Provide a rent declaration at the beginning of the year
  • Submit the rental agreement, rent receipts and other documents required by the employer in a timely manner.
  • Claim a deduction of 80GG up to 60000 if he does not receive an HRA from his employer.

Interest and penalties due to non-payment of the Advance on income other than Salary

Employees often have the impression that the TDS is deducted by their employer and that he therefore does not have to pay withholding tax. However, this incurs interest and penalties u/s 234B & 234C at the time of filing the return.

Employees should take the following steps to avoid such situations:

  • Declare all income other than salary to the employer at the beginning of the year
  • 90% of the total tax payable must have been paid before the end of the financial year

Read also : Avoid Penalties for Failing to Disclose Foreign Investments When Filing an ITR

Not reporting income as reflected in the AIS (Annual Information Statement)

A salaried person may under-report their income if the AIS is not verified or if there is an income mismatch reflected in 26AS.

“To ensure accurate income reporting, the employee should match the figures and reconcile with the employer/Form 16 if there is a discrepancy in the Form 26AS. In addition, the salaried employee should report all income posted in the AIS and if there are any inaccuracies, correct the information in the AIS by providing online/offline feedback,” says Bangar.