Got gift, but filed itr1 instead of itr2

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 January 2014 Hello,

I was a salaried employee in AY 2013-14. I got a prize of 33,333 in a competition, and they deducted 10,000 as TDS, and paid the rest.

One of the CA I knew, filed ITR-1 for me..with my salary income, and the prize amount as income from other sources..and specified that the tax amount was 10,000.

May be because ITR-1 is not for gifts, I got an email saying that I paid more tax, and got refund of Rs.6,700. (It means they are assuming I paid more tax).

I now understood that I should have filed ITR2 and not ITR1. But since the assessment is over and I got the refund, what do you guys think I should do?
Do you think I can leave it like this since assessmnt is over and they don't care..or do you think they will come back to me later asking me to file ITR2?

What do you suggest? Thanks in advance.

CA Sanjeev Kumar

CA Sanjeev Kumar (Expert)
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06 January 2014 if the refund amt is correct then ignore, else, you can file revised ITR.

Querist : Anonymous

Querist : Anonymous (Querist)

06 January 2014 Yea..it is correct. Because I fall under 10% tax slab..so they are assuming the TDS to be deducted on 33,333rs should be 3,333 and not 10,000. So they refunded the remaining amount.

But actually, I should not have got any refund..since it is 194B in tax credit..and 30% was the right deducation.

So you think I can just ignore?

Thank you for your time to reply

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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26 July 2024 Given the situation you've described, it's understandable to be concerned about whether you should take further action. Here’s a structured approach to addressing this issue:

### **Understanding the Issue:**

1. **Income Reporting**: You received a prize, which is treated as "Income from Other Sources" and was correctly reported in ITR-1.
2. **TDS Deducted**: TDS of ₹10,000 was deducted on the prize amount of ₹33,333.
3. **Incorrect ITR Form**: ITR-1 was used instead of ITR-2. ITR-1 is generally used for simple income scenarios and does not support certain complex income types. Since the prize amount falls under tax rules that could be considered under ITR-2, the form choice could be an issue.
4. **Refund Issued**: The tax refund of ₹6,700 indicates a mismatch between the TDS deducted and the tax liability assessed. It appears that the system might have calculated your tax liability based on incorrect assumptions or an incorrect form.

### **Steps to Consider:**

1. **Confirm the Accuracy of the Refund**:
- **Tax Liability Check**: Verify the correct tax liability for the prize amount. Given that the prize amount falls under Section 194B, it should indeed be taxed at 30% without rebate. However, with TDS already deducted, you should ideally not receive a refund if everything was correct.
- **Review Tax Credit**: Check the Form 26AS for the correct TDS credit and match it against your actual tax liability.

2. **Determine if Action is Needed**:
- **Assessment Over**: If the assessment has been completed and you've received the refund, it’s less likely that the tax authorities will pursue this unless there's a significant discrepancy or audit.
- **Voluntary Disclosure**: If you believe that the form used was incorrect, you can make a voluntary disclosure to the tax authorities. This is more of a precautionary measure and ensures that all filings are accurate.

3. **Future Precautions**:
- **Correct Form for Future Filings**: Ensure that you use the correct ITR form for future filings. For complex income types or if you have additional income sources, use ITR-2 or the appropriate form.
- **Consult a Tax Professional**: It might be beneficial to consult a tax advisor or CA to review the situation comprehensively and ensure that your tax filings are in compliance with current regulations.

### **Potential Actions:**

1. **Ignore and Move On**: If the refund has been received, and there’s no significant discrepancy or additional income unreported, you might choose to leave it as is, especially if you fall within the lower tax slab and have no other complexities.

2. **Voluntary Correction**: If you want to ensure complete compliance, you can file a revised return using ITR-2 to correct the form issue and clarify your actual tax liability. This might be more of a preventive measure rather than a corrective action.

3. **Tax Authority Communication**: You can write to the tax authorities explaining the situation and providing the correct details. This might not be necessary if there’s no significant impact, but it ensures that your records are accurate.

### **Summary**

- **If You Are Comfortable with the Refund**: If you are confident that the refund is accurate and the assessment is complete, you might choose to ignore further action.
- **For Peace of Mind**: Filing a revised return or making a voluntary disclosure can provide clarity and ensure all tax matters are in order.

It's always a good idea to consult with a tax professional or CA for personalized advice based on your specific situation and to ensure compliance with all applicable tax regulations.