For salaried employees receiving dividend income, filing your Income Tax Return (ITR) for AY 2026-27 can seem straightforward, but common pitfalls can lead to unnecessary complications. Let's explore practical scenarios and mistakes that often occur during the filing process.

Understanding Your Income Profile

While it might be tempting to assume that your salary alone dictates your ITR form choice, the reality is that dividend income can complicate things. For instance, if you earned dividends exceeding ₹10 lakh, you must consider the implications on your filing status and tax brackets.

Common Filing Mistakes

• Mismatches in AIS/Form 26AS: A frequent mistake occurs when the dividend income reported in your ITR does not tally with the Auto-Generated Income Statement (AIS) or Form 26AS. This can lead to notices from the tax department. Always cross-check your dividend income against these forms to ensure consistency.
• Incorrect ITR Form Selection: Many salaried individuals mistakenly file ITR-1 when they should opt for ITR-2, especially if their total income includes dividends, capital gains, or any other sources of income that exceed the limits allowed in ITR-1.
• Oversights with Capital Gains: Let's say you've sold shares and earned dividend income alongside. If you fail to report these capital gains accurately, it could lead to discrepancies, resulting in tax notices. Always declare any short-term or long-term capital gains to avoid future hassles.

Example Scenario

Consider Raj, who works in IT and has a salary of ₹12 lakh. He also received dividends of ₹15 lakh from his mutual fund investments. Raj filed ITR-1 believing it was sufficient for his profile. However, he received a notice because his total income exceeded the limit for ITR-1, and he did not report his dividend income correctly. This mistake not only caused confusion but also delayed his refund.

What to Do?

To avoid Raj's mistake, consider the following:

• Review All Sources of Income: Ensure you account for salary, dividend income, and any capital gains.
• Select the Correct ITR Form: If you have dividend income exceeding ₹10 lakh or any capital gains, opt for ITR-2.
• Consult a Professional: Especially if your income profile is mixed, engaging with a tax consultant can provide clarity and help avoid notices.

Conclusion

Filing your ITR as a salaried employee with dividend income requires attention to detail. By understanding your income sources and their implications on your tax return, you can safeguard yourself from common mistakes and potential notices. If you're unsure about your filing, consider reaching out for expert assistance.

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