Common Mistakes in Filing Income Tax Returns: Errors to Avoid Preventing Penalties and Delays
Filing income tax returns (ITRs) accurately and on time is essential for compliance with tax laws and to avoid penalties or legal consequences. However, many taxpayers inadvertently make mistakes that can trigger notices, delays, or severe penalties. Understanding these common errors helps taxpayers file correctly and avoid unnecessary complications.
Choosing the Wrong ITR Form
One of the most frequent mistakes is selecting an incorrect Income Tax Return form. Each ITR form is designed for specific income types and taxpayer categories. Filing the wrong form leads to the return being considered defective or invalid, which delays processing and may require re-filing.
How to avoid: Verify your income sources, residential status, and total income before choosing the form. For example, salaried individuals with income up to ₹50 lakhs should use ITR-1, while those with business income or capital gains must use other specific forms. Consulting the latest ITR form guide, or a tax expert is advisable.
Missing the Filing Deadline
Failing to file the ITR by the due date is a common yet critical mistake. Late filing attracts penalties and may delay refunds. Additionally, losses can’t be carried forward if the return is filed late, reducing tax planning options.
How to avoid: Keep track of key dates (e.g., September 15 (For F.Y. 24-25) for non-audit cases) and file well before deadlines. If missed, file as soon as possible before the final extended date to minimize penalties.
Not Reporting All Income Sources
Many taxpayers omit income, such as interest earnings, freelance income, rental income, or capital gains. This leads to discrepancies with the Income Tax Department’s data, triggering scrutiny and penalties.
How to avoid: Consolidate income from all sources and cross-check with Form 26AS and the Annual Information Statement (AIS) available on the tax portal to ensure all income and tax deducted at source (TDS) are correctly reported.
Errors in Personal and Bank Details
Incorrect declaration of PAN, Aadhaar, date of birth, email address, bank account number, or IFSC code can cause processing delays, miscommunication, or refund failures.
How to avoid: Double-check all personal and bank details before submission, ensuring they match official records. Incorrect bank details delay refunds or cause payment bounce-backs.
Not E-Verifying the ITR
Filing the return alone is not enough; the return must be e-verified within 30 days. Failure to e-verify means the ITR is not fully processed, leading to notices and uncertainties in tax compliance.
How to avoid: Use Aadhaar OTP, net banking, Electronic Verification Code (EVC), or Digital Signature Certificate (DSC) to complete e-verification immediately after filing.
Mismatch in TDS Details and Data
A common error is a mismatch between the income and tax details declared by taxpayers and those reported by employers or banks. This discrepancy invites notices and delays.
How to avoid: Reconcile details in Form 26AS and AIS carefully with your ITR before submission. Resolve any mismatch with the reporting entities promptly.
Selecting Incorrect Assessment Year
Filing ITR for the wrong assessment year invalidates the return and requires correction.
How to avoid: Ensure the assessment year corresponds to the financial year of income. For income earned in FY 2023-24, select AY 2024-25.
Consequences of Mistakes
- Penalties range from 50% of tax payable for under-reported income to as high as 200% for misreporting or fraudulent claims.
- Delays in refund processing or loss of refund altogether.
- Inability to carry forward losses if filing is late.
- Legal prosecution including fines and imprisonment in severe cases.
- Additional interest penalty on unpaid taxes due to delays.
Conclusion
Accuracy and timeliness in filing income tax returns are essential to avoid penalties and complications. Common mistakes such as choosing the wrong form, missing deadlines, under-reporting income, errors in personal details, and ignoring e-verification should be vigilantly avoided. Taxpayers should utilize Form 26AS and AIS for cross-verification and seek expert advice if unsure. Proactive and careful filing ensures compliance, smooth processing, and peace of mind.
