Top 10 common mistakes to avoid while filing itr in india
Income Tax Return Filing: Ensuring accuracy and compliance is crucial when filing your Income Tax Return (ITR) to avoid potential issues and ensure a smooth tax filing process. Explore ten common mistakes to steer clear of.
Income Tax Return Filing: Income tax is a tax paid on the income and profits people and entities earn, and filing the Income Tax Return (ITR) is a crucial annual task for taxpayers in India. Beyond legal requirements, fulfilling your tax obligations ensures you contribute to the government’s finances and national development, and also enables you to claim benefits like serving as a valuable proof of income, which can be essential for securing loans, applying for visas, or participating in government tenders, in addition to claim tax refunds if you’ve paid excess taxes.
So, as tax season approaches, with the process becoming more streamlined and digitised, it is essential to be vigilant and avoid common mistakes that can lead to penalties, delays, or even legal complications.
Here are the top 10 common mistakes to avoid while filing ITR FY 23-24:
Ensuring accuracy and compliance is crucial when filing your Income Tax Return (ITR). Explore ten common mistakes to steer clear of for a smooth tax filing process.
1. Incorrect personal information:
Taxpayers must be vigilant when providing their Permanent Account Number (PAN), Aadhaar, and address details. Special attention should also be given to the email ID and contact number provided, ensuring they match the official documents. Keeping all personal information up-to-date and accurate is essential to avoid any discrepancies.
2. Choosing the wrong ITR Form:
One should be careful while choosing the right ITR form while filing. (Source: FE)Taxpayers are required to report all their taxable and tax-exempt income sources using the correct ITR form applicable to their situation. The Income Tax Department provides different ITR forms for various types of taxpayers and income sources. Filing the incorrect ITR form can result in the rejection of the return, which may be termed ‘defective.’ Therefore, taxpayers must determine the appropriate form based on their income sources.
3. Failing to report all income sources:
According to the income tax laws, taxpayers must report all their income sources, whether they are exempt from tax or not. Due to a lack of awareness, many taxpayers fail to mention or report these under the heading ‘Income from other sources’ in their tax returns. This can include sources like interest, rental properties, or freelance work. Neglecting to disclose all income can lead to penalties for underreporting.
4. Not submitting the requisite forms:
To claim certain exemptions, taxpayers must file specific forms before submitting their returns. Mistakes often occur when claiming deductions under sections like 80C, 80D, and 80G. Ensuring the availability of valid documentation to support all deductions and exemptions claimed is essential.
5. Not reconciling Form 26AS:
Form 26AS is a consolidated tax statement that provides details of tax deducted at source (TDS) and tax collected at source (TCS) to the Income Tax Department in a taxpayer’s name. All incomes included in Form 26AS must be reported, as these details are already available to the tax authorities. Failing to reconcile the information in Form 26AS with personal records can lead to discrepancies and result in the taxpayer receiving a notice.
6. Not reporting income from the last job:
If an individual has switched jobs during the financial year, the income from the previous employer must be reported while filing the ITR, along with the income from the current job. Neglecting to report this income can create a discrepancy between the TDS certificate and Form 26AS.
7. Late filing of returns:
Delaying or missing the deadline for ITR filing can deprive taxpayers of certain rights, attract penalties, and result in interest on unpaid taxes. Losses cannot be carried forward to the next year, and late filing fees will be applicable. Taxpayers should be aware of the due dates and ensure the timely submission of their returns. The final date for filing the ITR for the financial year 2023–24 is Wednesday, July 31, 2024.
8. Not disclosing foreign assets and income
The government has taken steps to combat black money and limit money outflows from India. Taxpayers are required to disclose any foreign assets or income, such as foreign bank accounts or property, in their annual income tax returns. Failure to do so can result in hefty penalties and legal consequences.
9. Lack of evidence for deductions claimed:
For all expenses or investments claimed as deductions under Chapter VIA (e.g., children’s tuition fees, LIC, PPF, medical insurance policy), taxpayers must maintain records, evidence, and proofs. Claiming a deduction without adequate evidence can lead to the disallowance of such deductions and an increase in tax liability during a scrutiny assessment. Records need to be kept for at least 7 years, as the case can be taken up for income tax scrutiny for up to 6 years after the end of the year in which the return is filed.
10. Neglecting verification before submission:
The responsibility for filing the tax return does not end with the submission of the ITR. Verifying the return within 30 days of filing is compulsory, as without it, the Income Tax Department will not process the tax return. Failure to verify the ITR V within the allowed time frame will result in the return being considered ‘Invalid,’ and a notice will be sent by the department.
By being aware of these common mistakes and taking proactive measures to avoid them, taxpayers can ensure a hassle-free and compliant income tax filing process. Enlisted below are common mistakes to avoid while filing your ITR.
