Have you filed your income tax return correctly? Find out

Filing income tax returns (ITR) incorrectly can get you a notice from the taxman. ET Wealth puts together a short quiz to help you understand if you are on the right track.

1. When do I not have to file income tax returns?
A) When my income is below the basic exemption limit after claiming tax deductions
B) When my gross income is below the basic exemption limit of Rs 2.5 lakh
C) Either of A and B is applicable to me

2. Which form should I fill if I’m a salaried individual with no other income except LTCG of Rs 50,000 on stocks?
A) ITR 1 (Sahaj), because LTCG below Rs 1 lakh on stocks is tax free
B) Capital gains from stocks should be reported in ITR 2
C) Income from all market-linked investments should be reported in ITR 3

3. I transferred a flat to my wife. How should I report the rent income?
A) In my wife’s tax returns as it’s her asset
B) It is not taxable as a gift from a spouse is tax exempt
C) It is taxable in my hands if the house was transferred without consideration

4. Should I report income from FDs even after TDS is deducted?
A) I should report the income and pay additional tax, if required
B) I should claim a refund if it’s a tax-saving FD
C) I don’t have to report the income as tax has already been paid

5. If my wife is the primary holder of our joint bank account, who should pay tax on the interest earned?
A) It will be reported by both of us in proportion to the contributions made
B) It will be reported by both of us in proportion to the withdrawals made
C) It has to be reported in my wife’s tax returns as she is the primary holder

6. Does the Rs 45,000 I spent on medical expenses for my senior citizen parents qualify for tax breaks?
A) I can claim up to Rs 25,000
B) It does not qualify for deduction if not covered by a health insurance policy
C) It qualifies for additional deduction even if not covered by a health cover

7. Which of these incomes need not be reported in tax returns?
A) PPF withdrawal amount as it is tax exempt
B) Interest income below Rs 1,500 from FD in minor child’s name
C) Interest income below Rs 10,000 from savings bank account

8. How can I set off short-term losses from stocks brought forward from last year?
A) Against short-term and long-term gains from stocks and equity funds
B) Against capital gains as well as interest and rental income
C) Against short-term and long-term gains from any capital asset

Answer keys
1. B. You don’t have to file tax returns if your gross income—before deductions—is less than Rs 2.5 lakh. If deductions bring down your tax liability below this threshold, you have to file your returns.

2. B. LTCG from stocks and equity funds have to be reported in ITR 2 irrespective of the amount of gains. ITR 3 is used only in the case of income from F&Os as it is treated as business income.

3. C. Income from any asset transferred by husband to wife without consideration will be taxed in hands of the husband. Rental income will be clubbed to your income and taxed at marginal rate applicable.

4. A. Even if tax has been paid on interest from FD, you should report it in your tax returns and re-calculate your tax liability. Someone in higher tax slab of 30% will have to pay additional tax as TDS is only 10%.

5. A Interest is taxed in the hands of the person who makes the contribution, as per clubbing of income rule. If both the spouses contribute, they should both report it in proportion to the contribution made.

6. C. If your parents do not have health cover, you can claim an additional deduction of up to Rs 50,000 spent on medical expenses. This is over and above the Rs 25,000 limit available on health cover premiums.

7. B. Interest up to Rs 1,500 from FD in minor child’s name is tax exempt and does not need to be reported by parent in tax returns. However, all other tax free incomes have to be reported under exempt income.

8. C. Short term losses from stocks can be set off against long-and short-term gains from a capital asset. Longterm losses can only be set off against long-term gains. Capital losses can only be set off against capital gains.

Will you escape the taxman’s radar?

• Your score 0-3: NO

You are not familiar with tax filing and are very likely to get a defective return notice under Section 139(9) from the tax department. Take the help of a tax expert to fi le your returns.

• Your score 3-6: MAYBE

You are fairly acquainted with tax filing rules but should learn more to avoid any slip-ups in your tax returns.

• Your score 7-8: YES

You are up to date with tax filing rules. Keep a close eye on changing rules every year to stay updated.