Common Mistakes to Avoid When Filing Your ITR

Did you know that July 31 holds great significance for individual assessees under the Income Tax Act, 1961? Each year, individual taxpayers must file their income tax returns (ITRs) for the relevant financial year by this date. Sometimes, the government may extend this deadline to give taxpayers more time to manage their tax filing. Delays in ITR could lead to penalties and fines.

However, it is not just delays that you should be careful to avoid. Making any mistakes or errors in your ITR filing could also prove to be costly. To help you steer clear of this problem, we’ve covered the most common mistakes to avoid when filing your ITR.

Check out what you need to do (and sometimes not do) to ensure that your income tax return is filed correctly and with accurate information.

10 Common Mistakes to Avoid When You Are Filing Your ITR

Here are the top common mistakes to avoid when filing your ITR this year.

• Mistake 1: Choosing the Wrong ITR Form

The income tax e-filing portal offers a list of ITR forms to choose from. The right form for your tax filing purposes depends on the types of income you have earned during the year. For instance, if you earn up to ₹50 lakh and have only salary income, rental income from one property and income from other sources (like bank interest), you should choose ITR-1.

However, if you earn over ₹50 lakh, have more than one house property or have capital gains to report, ITR-2 is required. Choosing the wrong form is a crucial mistake to avoid when filing your ITR because it can invalidate your return.

Also Know More About E-Filing Income Tax Returns

• Mistake 2: Submitting Incorrect Personal Details

In your income tax return, you will have to enter various personal details like your name, address, email ID, phone number and the like. Many income tax assessees skip this part of their returns and jump right into the sections for income reporting. This is another common mistake to avoid when filing your ITR.

Reporting incorrect personal details could also make your return invalid. If you notice that you have submitted old or incorrect data, ensure that you rectify it and file a revised return within the due date.

• Mistake 3: Concealing Some Sources of Income

Many taxpayers hide different sources of income — especially those that have been obtained by cash or those that do not specifically feature in their annual income statement (AIS). This is a risky move because with the government ensuring that taxpayers’ PANs are linked with their accounts, it is easier to trace such fraudulent activity.

If you make this mistake when filing your ITR, you may receive an income tax notice. As a result, you may have to pay the tax due on that income along with any penalty or interest thereon.

• Mistake 4: Ignoring the Details in Form 26AS 

26AS is a tax statement that contains the details of the tax deducted at source (TDS) and the tax collected at source (TCS) pertaining to your PAN. Often, there may be a mismatch between the income you report and the income displayed in your Form 26AS. If the latter is correct, you will receive a tax notice asking you to explain the discrepancy.

To avoid this hassle, make sure that you check your Form 26AS before filing your ITR. If you have forgotten to include any income, you can do so before you submit your return. This way, you can steer clear of this common mistake to avoid when filing your ITR.

• Mistake 5: Not Including Interest Income

Interest income earned on your bank deposits, fixed deposits and even your savings account balance is also taxable (subject to some tax deductions). However, many people forget to include these earnings in their ITRs. If you have interest income to report, you must beware of this mistake to avoid when filing your ITR.

Such interest will be taxed as income from other sources. Since your bank account is linked to your PAN, it is not possible or smart to conceal such income. All you need to do is total the interest credits from your bank statement and enter the figure in your ITR.

• Mistake 6: Not Reporting Exempt Income

Under the Income Tax Act, 1961, some sources of income are exempt from taxation. For instance, agricultural income has historically been tax-free. That said, such exempt income must also be disclosed in the income tax return. Many taxpayers, however, fail to do so, making this another common mistake to avoid when filing your ITR.

Failing to report exempt income can make your tax return incomplete or invalid. If you have forgotten to include such income, you can file a revised return or rectify your ITR — provided the deadlines for these facilities have not elapsed.

• Mistake 7: Claiming Incorrect Deductions

The old tax regime offers a wide range of tax deductions. The new regime too contains some deductions to ease the burden of tax on the assessee. However, you must only claim tax deductions that you are eligible for. If you include a deduction that is non-existent, you could be penalised accordingly, as per the provisions of the Income Tax Act.

So, ensure that you only claim the amount of insurance premiums, home loan EMIs or education loan EMIs that you have actually paid during the relevant financial year. Also, ensure that you have the documentation required to support these deductions.

• Mistake 8: Choosing the Wrong Assessment Year (AY)

While this may seem like a minor error, it is, nevertheless, another mistake to avoid when filing your ITR. If you choose the wrong assessment year, you may not be able to claim certain deductions or exemptions that were introduced later. It may also lead to difficulties with income-matching between your ITR and 26AS.

Above all, selecting the wrong AY can also make your return defective because there may be many inaccuracies. To sidestep the hassle of dealing with revising your return, ensure that you verify the assessment year before you start filling in the information in your ITR.

• Mistake 9: Furnishing Wrong or Incomplete Bank Account Information

Your bank account information is one of the most important parts of your income tax return — especially if you are eligible for an income tax refund during the year. If the account you provide is inactive or does not exist, your tax refund may not be credited on time. This could lead to delays and added paperwork.

Your bank account should also be linked to your PAN to facilitate smooth income tax refund credits. So, if the account you wish to mention in your ITR is not linked to your PAN, ensure you complete that process before filing your returns.

• Mistake 10: Not Performing ITR Verification

ITR filing does not end when you submit your tax return online. Once that is done, you must also verify your ITR. You can do this online with your internet banking account, an Aadhaar OTP or an electronic verification code (EVC). The deadline for this is within 30 days from the filing date.

Alternatively, you can also carry out manual verification by signing and mailing your ITR-V form to the CPC, so it reaches them within 120 days from the filing date. Failing to verify your return is another common mistake to avoid when filing your ITR. It will render your tax filing invalid, and the effect will be the same as if you had not filed your ITR at all.

Conclusion

These mistakes may be common, but the repercussions can be quite steep if you do not pay attention and avoid them. If you are unsure of filing your income tax return yourself, you can always reach out to a tax expert or a professional who is experienced in ITR filing. Your chartered accountant can also help you with this. Whatever you choose, ensure that your tax filing is error-free, complete and accurate.

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