Ten ITR filing mistakes that you must avoid

Before you start filing your returns, make sure you download Form 26AS and the Annual Information Statement (AIS), both available through the I-T department’s e-filing portal (incometax.gov.in).

The details of tax deducted at source (TDS) and certain high-value transactions such as cash deposited, fixed deposits, immovable property transactions and so on must be in line with data in your Form 16, bank account statements and other financial records. Any mismatch can trigger a notice from the I-T department as the authorities will rely on figures in Form 26AS.

Should you spot any anomalies in these documents, reach out to the tax deductor, for instance, banks, which withhold TDS on the interest earned on fixed deposits, or your employer, who deducts tax from your salary every month, to sort out the discrepancies.

Also read: Your one-stop guide to filing income tax returns for FY 2023-24 (AY 2024-25)

Choosing the wrong ITR form

When you choose the wrong form for filing returns, you run the risk of not making adequate disclosures, which could result in a tax notice. For example, if you have made capital gains by selling shares or mutual fund units but file returns using ITR-1 instead of ITR-2, you could get a notice for non-disclosure from the I-T department. Selecting the wrong form could also render your return ‘defective’.

Not disclosing foreign assets

Several Indian employees, particularly from the IT sector, are often posted abroad. In such cases, they usually have to open bank accounts in their destination 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, property or pension account that you may have overseas, etc,  in the ITR and Schedule FA (foreign assets). Non-disclosure of foreign assets can attract a penalty of Rs 10 lakh and, in rare cases, even penal action under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

Simply Save podcast: Not disclosing foreign bank, pension accounts or other assets held abroad can trigger I-T notices

Not declaring income from capital gains

Since the AIS and Form 26AS contain the complete history of a taxpayer’s transactions, no income will go unnoticed. If you fail to report, say, the sale of shares or mutual fund units, you will get a notice for non-disclosure when the I-T department processes your returns.

Claiming deductions you are not eligible for

As Moneycontrol had pointed out earlier, the I-T department has been using technology to weed out suspicious tax deductions such as dubious donations made to political parties and even fraudulent deductions under Section 80C of the Income-tax Act. It is also possible that scammers may reach out to you via social media platforms with promises of ensuring higher tax refunds on the back of fake deductions. Falling prey to such frauds could land you in trouble. Thanks to AIS, which captures all your financial transactions, you could instead end up with notice and penalties.

Calculate your income tax for FY 2024-25

Not preserving documents detailing deductions

The new, minimal tax exemptions regime was declared the default tax regime starting from financial year 2023-24. So, all employers adhered to the rule which meant that employees who failed to expressly choose the old tax regime while filing proposed investment declarations in April 2023 saw a higher-than-anticipated tax outgo.

Such employees can pick the old tax regime even at the time of filing returns, but a mismatch in Form 16 and ITR data could lead to notices. Make sure you preserve all the documentary proofs for your deductions to enable you to fend off the queries should they arise.

Failure to disclose income from previous employer

You need to exercise caution—and, ideally, seek professional help—while filing returns if you switched jobs during the financial year. Such individuals will have dual Forms 16, issued by their previous and current employers.

Make sure that you declare 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 data from both Forms 16 will get reflected. It is best to be completely transparent to avoid tax notices due to the failure to declare all income.

Entering wrong 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.

Waiting until the last minute to file returns

Putting off the unavoidable exercise of filing returns until the last minute can be counterproductive. You might end up missing the deadline due to the lack of documents or key information. There is also a chance that the I-T department website could face glitches due to heavy traffic as the deadline nears.

So ensure that you start the process well in advance. While you can file returns for FY24 until December 31, you will have to shell out Rs 1,000-5,000 as late-filing fees.

Not completing the e-verification process

The ITR filing exercise does not end with submission of returns. The next step is to verify the returns, following which the I-T department will start processing them. You can e-verify your returns through the I-T e-filing portal using your Aadhaar, pre-validated bank account, demat account and so on. You can also download the ITR-V or acknowledgement form from the e-filing website and send it by post to the I-T department’s central processing centre in Bengaluru.

A delay in verification would also mean a delay in any tax refund due to you. If you verify your return 30 days after filing it online, the date of verification will be treated as the date of filing the return. This means that if you complete the verification 30 days after filing and the July 31 due date has passed, you might have to shell out late-filing fees.