These things must be included in your income tax return

The income tax return season is in full swing with 31st July approaching fast. While filing the income tax return salaried people only provide copy of the form No. 16 to the person preparing his income tax returns without any further details. This is due to the impression that interest on saving account is fully exempt and tax on their fixed deposits has already been deducted so they need not show these items while filing their income tax return. This is not show. Additionally there are many items which are taxable but are omitted due to oversight. With this article I have attempted to cover certain items of income which are taxable, but unknowingly we tend to ignore in our return of income.

Savings account and fixed deposits interest :

There are some other incomes which people normally presume to be tax free or not required to be included in the return of income. One of such items is interest on saving bank account. Though interest on saving bank account is eligible for deduction under Section 80TTA upto Rs. 10,000/- in a year but even if the amount of interest on saving bank account is less than Rs. 10,000/- legally you are required to include it in your income under the head “Income from other sources” and claim deduction under Section 80TTA. Likewise bank deducts tax on interest on your bank fixed deposits so you are under the impression that the tax liability in respect of such interest stands discharged, which is not true. Please bear in mind that even if tax is deducted at source on FD interest, the TDS rate and the rate which is normally applicable in your case is different. The tax is deducted @ 10% where tax rate applicable to you may be 20% or 30%. It is your liability to discharge the differential tax liability.

Also include interest in respect of Fixed Deposit with banks which have been renewed on maturity and are not reflected in your bank accounts.  Do not forget to include the accrued income on NSC etc. purchased in the earlier years.

Income earned on investment of minor child:

Any income earned by a minor child is required to be clubbed with the income of the parent whose income is higher. Parents normally invest money belonging to their minor child received as gift on several occasions.  The income/interest earned by the minor on these investments is required to be included in the income of the parent. The amount to be clubbed in the income of parents is over Rs. 1500/- per child so any interest/income of each minor is exempt up to Rs. 1,500.

Capital gains on switching of units of mutual funds during the year:

With more and more people opting the route of investing through the route of mutual funds,  cases being discussed here would be on higher side. We as mutual fund investors shift from one scheme to another for various reasons without there being any corresponding entry in the bank statement. The switching may be due to below average performance or regular transfer of funds from one scheme to another scheme like Systematic Transfer Plan (STP) or Systematic Withdrawal Plan (SWP) Since the units switched are of the same mutual funds house these  do not get reflected in the bank account so your chartered accountant may not even come to know about it. It might escape your memory as well by the time you sit down to prepare you tax return.

The profit/loss on switching of units may be  short-term or long-term entailing  different tax treatment. Even tax treatment for debt fund is different from equity oriented funds. Disclose such switch over transaction to your Chartered Accountant for proper and correct treatment of loss or profit on such switch.

Notional rental income in case more than one house property is self occupied.

As per the income tax laws any income from your house property is taxable under the head “Income from house property”. For a self occupied house the taxable value of the same is taken at nil. However this option is available in respect of only one house property and in case you are occupying more than one house for your self or your family members, you have to exercise the option to treat any one of the house as self occupied and the other/s are deemed to have been let out. In respect of such deemed to have been let out property you have to offer the notional rental income for tax..  Please note notional rent is not the same as nominal rent. The income to be offered is rent which is expected to be received in respect of the  property. Your Chartered Accountant will be in a position to help you in ensuring that your tax treatment of additional property is correct.

There are many people who own more than one house and the same are used either by themselves or by their parents. Since no rent is in fact received in majority of the cases, tax payer are under the impression that they are not liable to pay any tax on extra house property. Such situation may also arise in case you have a house property in your native place which is not let out and thus is deemed to be self occupied by you in addition to the property used for your residence at your work place.

Gifts or other promotional benefits received by you in case you carrying on business

This is the age of discounts and gifts in business. The same is offered not only to the customer but also to the businessman by the company manufacturing/distributing the product. So a few of you might have enjoyed tangible and valuable gifts from your business associates.  Some of you would have been treated with foreign tours as incentives for achieving certain targets. Since such items are not reflected in the bank account and thus not accounted in your books and thus go unreported. Please disclose this to your Chartered Accountant to be fully compliant.

I am sure this discussion will help you better comply the law and help you make your life easier.

If you are looking at discussing any other aspects of income tax law or for any other income tax related queries, please get in touch with me at the email address given below.

The author is a CA, CS and CFP. Presently working as Company Secretary of Bombay Oxygen Corporation Limited. Views are personal., He can be reached at jainbalwant@gmail.com and @jainbalwant

Balwant Jain is presently company secretary at Bombay Oxygen. He has diverse experience Industry and consultancy. He  has worked with  Apna Paisa  and Reliance Retail in addition to having two decades plus experience of having  own consultancy firm. He is a Chartered Accountant,  Company Secretary and a Certified Financial Planner.