ITR 2024-25: Seven common mistakes to avoid while filing income tax returns

Avoid these common mistakes for a hassle-free ITR filing exercise

September 15, the extended deadline for filing income tax returns (ITR) for the financial year 2024-25 (assessment year 2025-26), is now less than two months away.

The income tax department has released excel utilities for the key forms relevant for individual taxpayers – ITR-1,2, 3, and 4 – paving the way for initiating the process.

While chartered accountants say the offline excel utilities for ITR-2 and 3 are riddled with glitches, you can start by gathering all the essential documents, accessing the annual information statement (AIS), and comparing the data with your form-16, bank account, and capital gain statements, among others.

Being prepared in advance will help avoid some common mistakes that taxpayers tend to make every year. Here’s a list of seven such errors:

Claiming fraudulent tax deductions

Since no documentary proof needs to be attached while submitting I-T returns, some salaried taxpayers misuse this relaxation to claim higher tax refunds. They avail of deductions they're not eligible for under sections 80C, 80U, 80G (donations to charitable organisations / political parties), etc, to reduce their tax outgo.

However, this could mean inviting I-T notices, as taxpayers and their consultants have discovered recently. Thanks to the use of AI tools and the AIS, the I-T department is able to identify fraudulent deductions relatively easily.

To avoid such notices and penal action later, it is wise to be completely honest while filing your returns.

Not tallying form-16, AIS, and form-26AS

The first step in filing your ITR is not downloading the excel utilities, but scrutinising your AIS and form-26AS by logging into the I-T department’s e-filing portal – www.incometax.gov.in

The details of the tax deducted at source (TDS), high-value financial / immovable property transactions, and so on, must match across form-16, bank TDS certificates, and other financial records. Any mismatch – non-disclosure of income sources or foreign assets, for instance – can result in a notice from the I-T department.

If you come across any discrepancies in these documents, reach out to the tax deductor. This can be your bank, which withholds TDS on the interest earned on fixed deposits, or your employer, who deducts tax from your salary every month – for clarifications and rectifications.

Likewise, use the feedback option AIS to flag any errors in the AIS. In such cases, you must register your concerns and proceed to file your returns per your understanding. But ensure that you follow up and get the issues resolved to reduce the chances of tax demands, refund adjustment, and litigation.

Also read: Income tax: Filing ITR? Verify your AIS and Form-26AS first

Choosing the wrong form

If you select the wrong form for filing returns, for instance, ITR-1 instead of ITR-2, it will be seen as trying to conceal income and transactions that you ought to have disclosed in ITR-2.

For example, if you netted long-term capital gains (LTCG) of over Rs 1.25 lakh on the sale of stocks or had a foreign bank account in 2024-25, you cannot make these disclosures in ITR-1. In which case, you could end up with a notice for non-disclosure from the I-T department. Moreover, selecting the wrong form could also render your return ‘defective.’

Look beyond form-16

For salaried employees, form-16 is the key document while filing returns. However, it does not display all your income and transactions.

For instance, the interest earned on your savings account balance is subject to tax (though interest up to Rs 10,000 is deductible per section 80TTA). Likewise, you will not see capital gains that you may have made on the sale of shares or mutual fund units in your form-16.

Relying on form-16 alone would mean not reporting these earnings and running the risk of triggering a tax notice for non-disclosure. Ensure that you go through the AIS as well as your bank and capital gains statements issued by mutual fund intermediaries and broking houses, and make accurate disclosures.

Also read: ITR filing 2025: Delay in ITR utility release, AIS glitches key hurdles this year, say CAs

Not disclosing foreign assets

Indian employees posted abroad have to open bank accounts in those countries. However, many miss disclosing these accounts once they come back to India, acquire resident (and ordinarily resident) status, and file their ITRs.

Note that you have to disclose these bank accounts even if the balance is nil. Likewise, you have to declare any shares received via stock options from foreign companies, any property, or even pension account, etc, that you may have overseas in the ITR and Schedule FA (foreign assets).

Until FY 2023-24, inaccurate disclosure or failure to disclose foreign assets in the ITR attracted in penalty of up to Rs 10 lakh under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. However, in the July 2024 budget, Finance Minister Nirmala Sitharaman relaxed the rules. So, from FY 2024-25, non-reporting of movable foreign assets worth up to Rs 20 lakh has been de-penalised.

Not disclosing income from the previous employer

If you switched jobs during the financial year, the process is a tad more tedious. Such salaried taxpayers will have two form-16s, issued by their previous and current employers.

You must make sure that you disclose the income earned from both organisations, and do not ignore short deductions of income tax, if any, by any of your employers. The AIS captures all your income details, so income earned from both employers will get populated in the statement.

It’s your responsibility to ensure that your ITR reflects these details, else you could end up with notices for failure to declare all your income.

Errors in personal information, bank account details

Pre-validated bank account details ensure that you receive income tax refunds, if any, on time. Any errors in your bank details would mean a delay. Double check the account number, IFSC, bank name, and other details in your ITR form before submitting the returns. Likewise, reconfirm your name, mobile number, email ID, and other personal information entered in the forms.