Common Mistakes to Avoid When Filing Your Income Tax Return

How to avoid it

1. You should file your taxes early as possible. This makes the entire process smoother and stress-free.

1. Schedule a time to do your taxes so you don't forget. You can also set a reminder or put it up in your to-do-list.

1. Organise all your paperwork beforehand so the process is not delayed.

1. Double-check for errors and submit your returns well ahead of the deadline.

2. Mistake: Choosing the Wrong ITR Form

The wrong ITR form can delay your filing process as you may have to do it again. As mentioned earlier you can be penalised, or it can even cause the rejection of your return. It is important to choose the right form to file your ITR based on your income type.

How to avoid it

1. To make sure you are choosing the right form from the Income Tax Department's website or consult with a tax expert if you have any queries.

1. Evaluate your income sources before selecting the right ITR form to file your income tax return.

1. ITR-1 is your easiest option if you are salaried. ITR-3 will be more appropriate for people who earn money from their business or vocation.

3. Mistake: Failing to Disclose All Bank Accounts

The Income Tax Department requires complete transparency regarding your financial holdings so failing to disclose all your bank accounts, including foreign ones, can lead to serious legal consequences.

How to avoid it

1. List all your domestic and foreign bank accounts in your ITR

1. Don’t overlook accounts you may not actively use. You need to disclose the dormant bank accounts.

4. Mistake: Submitting Incorrect Personal Information

Simple errors like misspelling your name, entering the wrong PAN, or providing incorrect bank details can result in significant delays or rejection of your ITR. 

How to avoid it

1. Verify that all personal details (name, date of birth, PAN, address, and bank information) match your official documents.

1. Many e-filing platforms will pre-fill details from your PAN records but always cross-check for accuracy.

1. Double-check your bank account number and IFSC code, especially if you're expecting a refund.

1. If you've updated or changed any personal information, make sure everything is correctly reflected.

5. Mistake: Quoting the Wrong Assessment Year

The assessment year is always the year following the financial year. For example, for FY 2023-24, the assessment year is 2024-25. Quoting the wrong assessment year is a common mistake, especially when people confuse the financial year with the assessment year. This could lead to additional taxes or even double taxation.

How to avoid it

1. Be vigilant while filing assessment year in your Income tax forms. Always double-check these details before submitting your return.

1. Most online tax filing platforms will automatically fill in the assessment year once you provide the financial year.

6. Mistake: Failure to Reconcile Income and TDS With Form 26AS

Many taxpayers neglect to compare their TDS details in Form 16 and Form 26AS, leading to discrepancies. Mismatched information can delay your refund or lead to a higher tax liability.

How to avoid it

1. Form 26AS shows all taxes deducted at source (TDS) by different entities.

1. Cross-check the TDS in Form 16 against the details in Form 26AS to ensure they match.

1. If you spot any discrepancies, resolve them with your employer or the deductor before filing your return.

1. Make sure the TDS details align across all income sources, such as salary, interest, or other payments.

7. Mistake: Failing to Reconcile Income and Investments with AIS and TIS

The Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) provide data on your financial activities during the year. Missing or incorrect data can cause discrepancies in your return.

How to avoid it

1. Take a moment to double-check the pre-filled details in your ITR against the information in your AIS and TIS. These documents will show things like income from investments, interest, and other financial sources.

1. Make sure everything in your AIS and TIS matches up accurately.

1. Update any missing or incorrect data manually before submitting your return.

1. If you're unsure how to reconcile the details, it’s a good idea to consult a tax professional to ensure everything’s accurate.

8. Mistake: Omitting to Report All Income Sources

Some taxpayers fail to report all their income sources, including exempt income or income from secondary sources such as savings accounts or capital gains. This may result in charges of tax evasion.

How to avoid it

1. Whether it's salary, interest, rental income, capital gains, or exempt income, ensure everything is disclosed in your ITR.

1. Keep a record of all income you receive throughout the year, even if it’s exempt from tax or falls under lower tax slabs.

9. Mistake: Overlooking Multiple Form 16s from Different Employers

If you have worked with more than one employer during the year, you may have multiple Form 16s. Failing to consolidate these can result in errors in your income and tax calculation.

How to avoid it

1. If you've had multiple employers, you must combine the income from all your Form 16s before filing your return.

1. Cross-check the TDS figures from each Form 16. This way you can be sure there are no discrepancies in your tax calculations.

1. Check for errors in calculations when you are adding up salary income, HRA, and other allowances from all employers.

10. Mistake: Not Claiming Eligible Deductions

Deductions under various sections like 80C, 80D, and 80G reduce your taxable income, but many people fail to utilise these opportunities.

How to avoid it

1. Be aware of all available deductions under sections like 80C (PPF, EPF, NSC), 80D (insurance premiums), and others.

1. Keep proper documentation for all investments and expenses that qualify for deductions.

1. Tax filing platforms often pre-fill deductions based on the information you provide, but it's still a good idea to double-check everything.

11. Mistake: Not Submitting Rent Receipts for HRA

Some employers fail to include House Rent Allowance (HRA) in the Form 16 if rent receipts are not submitted on time, even if you are eligible to claim it.

How to avoid it

1. Provide rent receipts to your employer in advance so they can include HRA in your Form 16.

1. Ensure HRA is correctly reflected in your Form 16 before filing your return. If it's missing or incorrect, contact HR for a correction.

1. Keep proper documentation for rent payments, including receipts and rent agreements, for reference in future.

12. Mistake: Not Reporting Taxable Interest on NSC

The interest on National Savings Certificates (NSC) is taxable, but it is often mistakenly believed to be tax-free. Proper reporting is necessary to avoid penalties.

How to avoid it

1. Report the interest income from NSC under ‘Income from Other Sources’ in your return.

1. While the interest on NSC is taxable, it can be claimed as a deduction under Section 80C, except for the final year’s (fifth) interest.

13. Mistake: Failing to e-Verify Your Income Tax Return

Once you file your ITR, it must be e-verified within 30 days as per the latest CBDT notification. Failure to do so renders the ITR invalid, leading to delays in processing your refund or any further action on your tax return.

How to avoid it

1. After filing your return, complete the e-verification process within 30 days. You can use Aadhaar OTP, net banking, or the EVC process. It’s faster and easier to confirm if your return is valid.

1. You can set an alarm or reminder to complete the e-verification within the 30-day window to avoid missing the deadline.

1. If you can’t e-verify, send the signed ITR-V form to the Income Tax Department by post within the 30-day period. Keep in mind, this method is slower and may delay the acceptance of your return.

14. Mistake: Ignoring Correspondence from the Income Tax Department

Ignoring any communication from the Income Tax Department can lead to serious consequences, such as legal actions or fines.

How to avoid it

1. Keep a close eye on emails, SMS messages, or letters from the Income Tax Department. These may contain important updates or requests that need your immediate attention.

1. If the notice asks for clarification, documentation, or payment, respond within the specified time frame.

15. Mistake: Failing to Complete Schedule AL

If your net income exceeds Rs.50 lakh, you must fill out Schedule AL, providing details of your assets and liabilities. Failing to do so can result in penalties or further scrutiny from the tax authorities.

How to avoid it

1. If your income exceeds Rs.50 lakh, ensure you provide the required details of your assets and liabilities.

1. List all your assets and liabilities. Include all relevant information as required under Schedule AL to remain compliant.

1. If you’re unsure whether you meet the threshold for Schedule AL or need help filling it out correctly, consult a professional to avoid any major errors.

16. Mistake: Not Reporting Foreign Assets and Liabilities

Indian residents and ordinarily resident individuals must disclose their foreign assets, even if the income from those assets is not taxable in India. Not disclosing foreign assets can lead to you being penalized. It can also lead to legal issues.

How to avoid it

1. Report all foreign assets in Schedule FA of your ITR.

1. Familiarise yourself with the rules for reporting foreign assets, even if they aren't taxable.

17. Mistake: Not Settling Your Advance Tax Liability

If you anticipate a tax liability of Rs.10,000 or more, advance tax is required. Failure to pay or short payments will attract interest charges and penalties.

How to avoid it

1. Estimate your tax liability early and pay advance tax in four instalments.

1. Monitor the due dates and settle in time to save penalties.

1. Make use of the online platforms for convenient payment of advance taxes.