Filing Income Tax Returns – Mistakes You Should Avoid

The deadline for individual taxpayers to file their income tax returns is 31st July of the assessment year. Delaying the process until the last moment often leads to hurried filings and errors, which can affect the accuracy and processing of the return. Tax returns may be submitted either manually or electronically. Since Financial Year 2016–17, e-filing has been mandatory if you’re claiming a refund or if your income exceeds ₹2,50,000 under the old regime or ₹3,00,000 under the new regime. We provide the best ITR filing services!

Below are some of the most frequently made errors while filing ITRs:

1. Using the Wrong ITR Form

Choosing the correct ITR form is crucial. Submitting returns with the incorrect form may result in the Income Tax Department issuing a defect notice, which must be corrected within a specific timeframe. The form you use depends on the income sources and your taxpayer category.
Example: A salaried individual earning less than ₹50 lakh and not having capital gains should file using ITR-1. If you earn income from a business or profession, ITR-3 is the right form.

2. Entering the Incorrect Assessment Year

Make sure the correct Assessment Year (AY) is selected. For the Financial Year 2023–24, the AY should be 2024–25. Errors in AY selection may lead to tax being paid twice or the imposition of penalties.

3. Providing Wrong Personal Details

Personal details like name, address, email ID, mobile number, PAN, and date of birth should match exactly with your PAN records. In case you’re expecting a refund, double-check your bank details, including account number and IFSC code, to ensure smooth credit of the refund without any delay or issues.

4. Failing to Report All Sources of Income

Income from sources beyond your primary income must also be declared. Taxpayers are required to report all types of income—whether from savings account interest, fixed deposits, house rent, short-term capital gains, or any other earnings. This includes both taxable and exempt income. Many individuals unintentionally omit exempt income details.
Example: Even though long-term capital gains up to ₹1 lakh from equity shares or equity mutual funds are exempt, the gains still need to be reported under the capital gains section. Failure to do so could raise red flags with the tax department.

5. Entering Details in the Correct Format

ITR forms include multiple fields that must be filled with precision. Each field requires information in a specific format, and any deviation could cause filing errors.
Example: Dates must be written strictly in the DD/MM/YYYY format. Using any other format may result in incorrect submission of your return.

6. Not Matching TDS and Income with Form 26AS

It’s essential to compare your income and TDS details with Form 26AS before submitting your return. This form reflects TDS, TCS, advance tax, self-assessment tax, and high-value transactions. Salaried taxpayers should reconcile Form 16 provided by their employer with Form 26AS. If certain TDS entries do not appear in 26AS, they won’t be credited in your ITR. Ensuring accuracy in Form 26AS helps prevent lower refunds or unexpected tax dues.

7. Ignoring AIS and TIS Reconciliation

The Annual Information Statement (AIS) offers a broader view beyond Form 26AS, covering GST turnover, securities transactions, foreign transfers, etc. The Taxpayer Information Summary (TIS) gives a summarized view of your income, including details submitted by third-party entities like banks. It includes a reported value (as submitted by institutions) and a derived value (adjusted after your feedback). Since this derived value is prefilled in your ITR, it’s vital to ensure it accurately reflects your actual income and investments.

8. Handling Form 16 from Multiple Employers

When a taxpayer switches jobs during the financial year, they receive separate Form 16s from each employer. This can make filing the return a bit complex. In such cases, it’s essential to combine the salary income from all employers and report the total salary income under the appropriate section while filing the return.

9. HRA Not Claimed Through Employer

If you haven’t submitted rent receipts to your employer’s HR department, you may miss out on claiming House Rent Allowance (HRA) through payroll. Additionally, taxpayers often don’t realize that their landlord’s PAN is required if annual rent exceeds ₹1 lakh. The good news is that you can still calculate and claim HRA exemption directly while filing your ITR.

10. Missing Out on Available Deductions

Taxpayers are eligible to claim deductions for various expenses, donations, and investments that can significantly lower their tax liability. However, determining the exact eligible amount and category can be confusing. 

11. Skipping Advance Tax Payments

To avoid interest and penalties, taxes must be paid as per due dates. Advance tax is payable in four tranches: June 15, September 15, December 15, and March 15. Failing to pay or underpaying attracts 1% monthly interest on the outstanding amount until it is cleared.

12. Taxability of NSC Interest

Interest earned on National Savings Certificates (NSC) is not tax-free. While the interest is taxable, it qualifies for deduction under Section 80C in the first four years. In the final year, the interest is taxable under applicable slab rates. To enjoy 80C benefits, the interest must be reported under ‘Income from Other Sources’.

13. Not E-Verifying ITR Within Deadline

Once your income tax return is filed electronically, it must be e-verified within 30 days to complete the process. E-verification can be done via Net Banking, Aadhaar OTP, or EVC through your email and mobile number. If unable to e-verify, sign and post the ITR-V to the CPC within 30 days via ordinary or speed post to ensure the return is processed.

14. Ignoring Income Tax Department Communications

Timely Action: Any communication or notice from the Income Tax Department should be addressed without delay. Failing to respond can result in penalties or even legal consequences.

Required Corrections: If discrepancies are found or there is a tax shortfall, take immediate steps to correct the return and clear any outstanding dues.

15. Omission of Schedule AL

When an individual’s total income exceeds ₹50 lakh, Schedule AL becomes mandatory. This schedule requires individuals and Hindu Undivided Families (HUFs) to report all assets and liabilities they hold at the end of the financial year.

16. Failure to Report Foreign Assets and Liabilities

According to the Income Tax Act, 1961, Indian residents who qualify as ordinarily resident must disclose their foreign income, bank accounts, assets, and shareholdings in Schedule FA of the ITR, regardless of whether that income is taxable in India.

Schedule FA (Foreign Assets) captures information like overseas mutual funds, foreign equity shares, and Employee Stock Ownership Plans (ESOPs) provided by foreign employers.