Filing income tax returns (ITR) is an essential financial responsibility for individuals and businesses in India. It ensures compliance with tax laws and helps taxpayers avoid penalties while contributing to the nation’s revenue. However, many people make common mistakes that can lead to filing issues, delays, or even fines. This blog outlines common mistakes to avoid when filing ITR in India and tips to file accurately.
1.Incorrect Personal Information
One of the simplest yet most common mistakes is providing incorrect personal details such as your name, PAN (Permanent Account Number), or bank account information. Even a small error can lead to the rejection of your tax return or delays in receiving refunds.
Tip: Double-check all personal information before submitting your ITR. Ensure that the details on your PAN card and bank account match the details you provide on the return.
2.Choosing the Wrong ITR Form
The Income Tax Department of India offers different ITR forms, each meant for specific categories of taxpayers. Selecting the wrong form can lead to rejection or an incorrect assessment of your tax liability.
Tip: Identify the correct form based on your income type:
- ITR-1 (Sahaj): For individuals with income up to ₹50 lakh from salary, one house property, or other sources.
- ITR-2: For individuals with income above ₹50 lakh, capital gains, or more than one house property.
- ITR-3: For those with income from business or profession.
- ITR-4 (Sugam): For those opting for the presumptive income scheme.
Consult a tax advisor or refer to the official Income Tax Department website to ensure you are using the correct form.
3.Failure to Report All Sources of Income
Many taxpayers make the mistake of not reporting all their sources of income, such as rental income, freelance work, or interest from savings accounts and fixed deposits. Omitting any income, whether taxable or exempt, can lead to legal consequences if detected during an assessment.
Tip: Ensure that you report all sources of income, even if they are minor or exempt. This includes:
- Interest from savings accounts and fixed deposits: Report these even if TDS (Tax Deducted at Source) has already been deducted.
- Rental income: Include any rental income from property.
- Capital gains: If you sold any assets like shares or property, include the capital gains in your return.
4.Neglecting to Claim Deductions and Exemptions
Failing to claim available deductions and exemptions can lead to paying more tax than necessary. Commonly overlooked deductions include:
- Section 80C: Investments in PPF, ELSS, NSC, life insurance premiums, and principal repayment on home loans.
- Section 80D: Deductions for medical insurance premiums for self, family, and senior citizen parents.
- Section 80TTA/80TTB: Deductions for interest income from savings accounts and for senior citizens on deposits.
Tip: Review your income and expenses carefully and consult a tax professional if necessary to ensure you are claiming all eligible deductions and exemptions.
5.Mismatching TDS Details
Many taxpayers overlook matching their TDS details with the information provided in Form 26AS or the Annual Information Statement (AIS). Discrepancies between your ITR and the TDS recorded in these forms can result in mismatches that delay processing or lead to demands for additional tax payment.
Tip: Download and review Form 26AS and AIS before filing your return to ensure that all TDS amounts match. This ensures accurate reporting and helps avoid discrepancies that could trigger notices from the tax department.
6.Not Verifying the ITR After Filing
Filing your ITR is only part of the process. Failing to verify the return renders it invalid, which means it will not be processed by the Income Tax Department. Verification can be done online through methods like Aadhaar OTP, net banking, or through the Electronic Verification Code (EVC).
Tip: Make sure to complete the verification process within 120 days of filing your return. If not verified, your return will be considered void, and you’ll have to file it again.
7.Incorrectly Claiming Deductions
Claiming deductions incorrectly, such as overstating the amount or claiming ineligible deductions, can lead to scrutiny and penalties. The tax department cross-verifies claims, and inconsistencies can result in notices or audits.
Tip: Ensure that you have proper documentation for all deductions you claim, such as investment receipts, insurance premium payments, and home loan interest certificates.
Conclusion
Filing income tax returns in India requires attention to detail and awareness of tax regulations. By avoiding common mistakes such as providing incorrect personal information, selecting the wrong ITR form, or failing to report all sources of income, taxpayers can file accurate returns and avoid penalties. Using technology, reviewing Form 26AS, and verifying your ITR are essential steps to ensure a smooth filing process. For added assurance, consider consulting a tax professional to navigate complex tax situations and maximize your savings.