Incomes which we generally forget to include in our ITRs (2024)

Capital Gains on switch transaction of mutual funds

Mutual funds allow you to switch your investments from one scheme to another scheme under Systematic Transfer plan (STP) without the same being reflected in your bank statement. In case of STP your investment is shifted periodically from one scheme of the same fund house to another. Likewise, you shift your investment from one scheme of the same fund house to another randomly, which also may not reflect in your bank statement. These transactions of switching may result into capital gains/loss. Mutual fund transactions are generally taken into account for ITR purposes based on entries in the banks statement.

Since such transaction of investment and redemption do not reflect in your bank statement, your Chartered Accountant is unlikely to include the profit/loss in your ITR unless you furnish him detailed statement of your mutual fund transactions. So please obtain and handover the detailed transaction statement of all your mutual fund investments for the year and ensure that the profit/loss are properly included in your ITR. Please note all the transactions of mutual fund profits are taxable so it is important to report them irrespective of the amount of profit.

Proper Disclosure of interest income

I have observed that most of the people get their ITR filed through an ITR filing facility either online or offline. These ITR filers file your ITR just on the basis of your form No. 16 without bothering to include your other income in the ITR. Though interest on saving account enjoys deduction upto Rs. 10,000/- but the correct process to claim this deduction is to first show it in your income and then claim deduction under Section 80TTA. People generally do not show the saving bank interest in their ITR which is technically wrong. Many taxpayers especially salaried and pensioners carry an impression that such interest is fully exempt and need not be included in ITR and which is wrong as you have to pay tax on saving bank interest beyond ten thousand rupees.

Many retired persons invest significant portion of their retirement corpus under various fixed deposits to earn regular income for their monthly expenses. Many of such persons are under the impression that since tax has already been deducted from their interest they are not required to include such interest in their income while filing ITR. Such an impression is wrong as the TDS rate and the rate of tax payable on such interest may be different. Your slab rate may be higher than 10%, the rate at which the tax is deducted, and you have to pay the differential tax separately. In case the slab rate is lower than the TDS rate or you do not have any tax liability based on aggregate of your income, you may be entitled to claim a refund. Even in case of fixed deposits renewed during the year, you need to include the interest comprised in the fixed deposit matured during the year, in case you have not offered the interest income accrual basis earlier. Even for those who offer interest income on accrual basis they have to collect interest certificate in respect of all deposits and include the same in ITR.

Clubbing of minor’s income

All passive incomes of a children are required to be included in the income of the parent with higher income. There is an exemption available upto Rs. 1500/- in respect of each child and income beyond this has to be included in your income. Such income may arise on the investments made by you of money received by the minor child as gift on several occasions. Many parents are not aware about this law of clubbing of minor child’s income and thus unintentionally contravene the law by not including it in the ITR of any parent.

Notional rental income for more than two houses occupied by you

Presently an Individual is allowed to have two self-owned house as self-occupied. So in case you have more than two houses for occupation of yourself or your relatives, you have to treat the excess house/s as if they have been given out on rent and include market rent of such houses in your income even though you have not received any money. Such situation may arise in cases where you have two or more houses at the place of your work and one house inherited by you in your native place without you even realizing it.

So in case you have more than two houses owned and used by you or kept for your own occupation, please offer the rental income for such house/s to be on the right side of the law.

So from above discussion it becomes clear that there are various items of income which you have been omitting all these years. Start including these in your ITR from this year and do a fresh beginning.

Balwant Jain a tax and investment expert and can be reached at jainbalwant@gmail.com and @jainbalwant on Twitter

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Published: 15 Aug 2021, 10:55 AM IST