Filing income tax returns is an essential annual process that most taxpayers are familiar with. However, many make the mistake of postponing this exercise until the last minute. This can cause delays due to traffic to the computer portal closer to July 31 or omission of income or deductions due to filing returns in a hurry.
This is especially true for taxpayers who have income from multiple sources, such as salaries, home ownership, capital gains, foreign income, crypto earnings, etc. Similarly, salaried taxpayers who were unable to select the old tax framework as the regime of choice in April 2023 or those who changed jobs during the financial year should take more care while filing returns due to the complexities involved. If in doubt, it is best to resort to the services of public accountants or professional tax advisors.
Here are seven common mistakes you should avoid to ensure smooth ITR filing, processing and refunds.
Since there is no need to attach documentary evidence while filing IT returns, some misuse this relaxation to get tax refunds. As Moneycontrol has previously pointed out, some taxpayers tend to fraudulently claim deductions under section 80G on donations made to charities or deductions under section 80U for disabled taxpayers.
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However, this could mean inviting IT notices, as many earners have learned over the past year. Through the use of artificial intelligence tools and the Annual Information Statement (AIS), the IT department can verify the accuracy of its (faulty) disclosures.
To avoid falling into the crosshairs of the tax department, it is better to be honest when filing your returns, rather than creating problems later.
Also read: Ten mistakes in filing the ITR that you should avoid
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Failure to reconcile data from Form 16 and Form 26AS
Before you start filing your returns, you need to download Form-26AS and Annual Information Return (AIS), which can be accessed through the IT department’s e-filing portal (income.gov.in).
The details of tax deducted at source (TDS) and high-value financial and real estate transactions, etc., must match the details in Form 16 as well as bank TDS certificates and other financial records. Any discrepancies may result in a notice from the IT department.
If you discover any discrepancy in these documents, contact the tax deductor (for example, banks, which withhold TDS on interest earned on fixed deposits, or your employer, who deducts tax from your salary every month) to obtain clarifications and rectifications.
Read also: Invest abroad? Please note these tax rules
Selecting wrong ITR form
If you choose the wrong form for filing returns, for example, ITR-1 when ITR-2 was the relevant form for you, you will be deemed to have, even if inadvertently, concealed income and transactions that you should have disclosed in ITR. -2. For example, let’s say you made capital gains by selling shares or had an offshore bank account in 2023-24.
If you use ITR-1, you cannot make these disclosures. You could end up with a confidentiality notice from the IT department. Additionally, selecting the wrong form could also cause your return to be “defective.”
Failure to disclose income from previous employer
If you changed jobs during the financial year, you should take extra caution. Such salaried taxpayers will have dual Form 16s, issued by their former and current employers.
You should be sure to disclose income earned from both organizations and not ignore short-term income tax deductions, if any, by either of your employers. The AIS captures all the details of your income, so income earned from both employers will be completed.
If your ITR does not contain these details, you could end up receiving tax notices for not declaring all income.
Rely solely on Form-16 while filing returns
For salaried employees, Form-16 is the key document while filing returns. However, Form-16 does not show many income and transactions.
For example, your savings account balance would earn interest, which is taxable (although savings account interest up to Rs 10,000 is allowed as a deduction under section 80TTA). Likewise, you will not see any capital gains you have made on the sale of shares or mutual fund units in your Form-16.
Relying solely on Form-16 would mean losing the obligation to report this income and risk receiving a tax notice for non-disclosure. Be sure to review the AIS, as well as your bank statements and capital gains statements issued by mutual fund intermediaries and brokerage firms, for accurate disclosures.
Also read: How to calculate your tax expenditure for the financial year 2024-25
Entering incorrect bank account details
Pre-validated bank account details ensure that you receive income tax refunds, if any, on time. Any error in your bank details would result in a delay. Double-check the account number, IFSC, bank name and other details in your ITR form before submitting returns.
Don’t ignore IT’s return verification process
The ITR filing process does not end with uploading and submitting returns online. For your return to be processed by the IT department, you must verify it within 30 days of submission. You can easily do this online through the IT e-filing portal using your Aadhaar, pre-validated bank account, demat account, etc. It is better to complete this process along with filing the ITR rather than taking the pedal off for 30 days.
If you do not complete the process within 30 days, the verification date will be treated as the date of filing the returns. So, if you check your returns after 30 days and the due date of July 31 has already passed, it will be considered a post-due date filing and you may have to shell out late filing fees of Rs 5,000 ( Rs 1,000 if income is less than Rs 5 lakh).
