5 Common ITR Filing Mistakes (and How to Avoid Them)

As July 31st approaches every year, many people get worried and rush to file their income tax returns. This date is more than just a deadline. It's an important deadline to file taxes since any mistakes or delays can lead to penalties and unwanted messages from tax authorities. While extensions are sometimes granted by the tax authorities, the main challenge goes beyond just filing on time. It’s also about making sure every detail that is being filled is accurate. Even small errors can have serious financial consequences.

The Indian tax system is complicated, and it often causes even careful individuals to make the same mistakes repeatedly. This article will walk you into the details of tax filing along with how you can avoid mistakes and pay penalties while filing taxes. This article talks about common pitfalls to avoid and gives clear instructions on best approaches to file taxes in order to reduce stress and protect your finances from unnecessary issues.

Missing the ITR Filing Deadline

To avoid ITR filing mistakes and costly consequences, keep the following points in mind:

• Extended Deadline: Although the deadline for filing your tax return for FY 2024-25 is now extended to September 15, 2025, however, it’s still important to file the ITR as early as possible in order to claim the refund early.
• Assuming No Filing Required for Low Income - Many individuals assume that if their income is below ₹7 lakh (for FY 2024-25) or ₹12 lakh (for FY 2025-26), since no tax is payable, they are not required to file a return. However, if your gross total income (before claiming deductions) exceeds the basic exemption limit, filing your ITR is still mandatory, even if your final tax payable is zero after rebates.
• Late Filing Penalties: Missing the deadline is a common ITR mistake and it can lead to:
  1. A late fee charge of up to Rs.5,000 under Section 234F.
  2. Interest under Sections 234A, 234B, and 234C is levied in cases of delayed ITR filing returns or taxes are underpaid. To avoid such interest, it is advisable to pay advance tax on any additional income. A Chartered Accountant or a Tax expert can assist in accurately determining your tax liability and evaluating the benefits of both the old and new tax regimes.
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  3. To enable it to carry forward certain losses, like capital losses, such carry forward is allowed only if the ITR is filed within the due date. This will affect future tax benefits through set off of such losses.

• This highlights the importance of following a reliable ITR filing guide and meeting deadlines.
• One of the lesser-known yet significant consequences of missing the ITR filing deadline is that your return must be filed under the New Tax Regime by default, even if you had opted for the Old Regime through your employer.

Choosing the Wrong ITR Form or Assessment Year

One of the most common and crucial mistakes in ITR filing is choosing the wrong ITR form. This seemingly simple choice is crucial because it determines the entire structure of your tax return and can lead to rejection if it's incorrect.

Here’s a quick ITR filing guide to help you avoid this common mistake:

• ITR-1 (Sahaj): This ITR form is best for salaried individuals with total income up to Rs.50 lakh from salary or pension, one house property, and other basic sources like bank interest. Remember, it's not suitable for those with capital gains (unless the long-term capital gains are very small under specific conditions), foreign income, or income from more than one house property.
• ITR-2: This form is designed for individuals and HUFs who do not have business or professional income. You must use it if you have:
  1. Income over Rs.50 lakh.
  2. Income derived from more than one house property.
  3. Any capital gains (from property, shares, mutual funds, etc.).
  4. Foreign assets or foreign income.
  5. Agricultural income above Rs.5,000.

• ITR-3: This ITR form is for individuals and HUFs with income arising out of business or profession. It also includes other income sources like salary, house property, and capital gains.
• Hence, always check your income sources carefully before choosing your ITR form to ensure correct and valid filing.
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• Selecting the wrong Assessment year in challan while making the payment of tax.

Submitting Incorrect Personal Details

• When you fill out your ITR, it’s easy to focus only on the numbers. However, one of the most common and significant mistakes is overlooking your personal details.
• Ensure that your PAN, Aadhaar, address, email, and contact number match with the details connected to your PAN.
• Providing the correct bank account number and IFSC code is crucial for receiving your tax refund promptly and without issues.
• The Income Tax Department sends important notices to the address on your last ITR. So, double check your ITR filing process in order to avoid any such circumstances.

Concealing Some Sources of Income

• One of the most common mistakes in ITR filings is not reporting all income sources. The Income Tax Department can easily track undeclared income due to PAN linking and stricter reporting requirements. This can lead to Income Tax Notice. Match the income reflecting in 26AS & AIS.
• Do not hide any income received in cash or income that does not show up on your Annual Information Statement (AIS). These are traceable.
• You must report crypto income and other digital assets under Schedule VDA.
• Freelancing Income often gets overlooked but must be reported.
• Interest Income:
• Fixed Deposits (FDRs): You must report interest earned on FDRs each year as taxable income, not just at maturity. Report it under 'Income from other sources.' If TDS is deducted by the bank, you still need to report this income and claim the TDS in your ITR.
• Report all interest income you earn from Savings Accounts & Other Investment.
• You are required to report any long term or short term profit or loss arising from Share/stock trading. Its is mandatory to disclose if you have incurred only a loss.
• Not reporting any income, regardless of its taxability, can result in income tax notices. This may lead to the payment of outstanding tax, penalties, and interest.
• Hence, always ensure complete and precise income disclosure when filing your ITR to avoid penalties and legal issues.

Ignoring the Details in Form 26AS

A major mistake in filing your income tax return (ITR) that can lead to notices is not reconciling your income with Form 26AS and the Annual Information Statement (AIS).

Form 26AS: Your TDS/TCS Statement:

• This document offers a summary of all Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) linked to your PAN.
• It also includes details about advance tax and self-assessment tax paid.
• If the income you report in your ITR doesn't match the TDS/TCS information in Form 26AS, the Income Tax Department is likely to send a notice asking for an explanation. This can create unnecessary hassle and possible penalties.
• Refund/Tax Impact: Any mismatch between Form 26AS and the income or tax reported in your return may result in discrepancies in tax credit or refund. It is important to ensure whether the tax so deducted has been duly deposited.

Annual Information Statement (AIS):

• AIS provides more than just TDS/TCS; it lists various financial transactions, including interest income from savings accounts and fixed deposits, dividend income, high-value transactions like property purchases or sales, large cash deposits, and securities transactions.
• Importance: It gives the Income Tax Department a wider view of your financial activities.
• If you omit any income or transaction reported in your AIS from your ITR, it can result in a tax notice.
• Therefore,always download and carefully verify the data in your Form 26AS and AIS against your records before you file your ITR. If you find any discrepancies, resolve them by either contacting the deductor, such as your employer or bank, to correct their records, or by updating your ITR to reflect the correct income. Addressing these mismatches proactively is essential for a smooth and compliant ITR filing process.

Conclusion

While common ITR mistakes might seem small, they can lead to serious consequences. Not paying close attention to the details of your ITR filing can result in penalties, fines, and legal issues. If preparing and submitting your income tax return feels overwhelming, or if you have questions about any part of the ITR filing guide, it’s a good idea to get professional help.

Don’t risk making mistakes that could cost you. An experienced tax expert or a Chartered Accountant (CA) familiar with ITR filing can ensure your return is done correctly and completely. Let a CA take care of it through Taxspanner.

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Frequently Asked Questions (FAQs)

1. Who must file an ITR?
   Anyone with gross income above the exemption limit must file, even if no tax is payable after deductions.
2. What is the ITR filing deadline for FY 2024-25?
   The due date for filing ITR for individual taxpayers (non-audit cases) has been extended to September 15, 2025.
3. What happens if I file late?
   You may face a late fee up to ₹5,000 and interest on unpaid tax. Loss carryforward benefits may also be lost.
4. How do I choose the right ITR form?
   Use ITR-1 for salaried individuals with simple income, ITR-2 for capital gains or multiple properties, and ITR-3 if you have business income.
5. Do I need to report all income sources?
   Yes, including freelancing, crypto, interest income, and capital gains to avoid penalties.
6. What is Form 26AS?
   A tax credit statement showing TDS, advance tax, and self-assessment tax linked to your PAN.
7. Can I revise my ITR if I make a mistake?
   Yes, you can file a revised return before the assessment year ends.
8. Should I seek professional help?
   If your tax situation is complex, consulting a CA or tax expert is recommended to avoid errors.