7 income tax mistakes that can get you a notice

Filing Income Tax Returns (ITR) in India demands meticulous attention to detail, as even minor errors can result in a notice from the Income Tax Department. Certain common mistakes that may lead to scrutiny or notices from the Department include – not reporting all sources of Income, selecting incorrect ITR Form, mismatch in TDS details, not reporting foreign assets/ income, False or Inflated Deduction Claims, Not Filing ITR When Mandatory, etc.

The details of certain common mistakes are as under:

> Not Reporting All Sources of Income – Failing to disclose all income sources is a frequent mistake. Even tax-exempt income, like long-term capital gains (LTCG) up to Rs. 1.25 lakh from equity shares or mutual funds, must be reported. The Income Tax Department cross-verifies ITR data with Form 26AS and the Annual Information Statement (AIS), and any discrepancies can lead to a notices.

> Selecting incorrect ITR Form – Selecting an incorrect ITR form based on your income sources or taxpayer category can result in a defective return notice under Section 139(9).

> Mismatch in TDS Details – Discrepancies between the Tax Deducted at Source (TDS) claimed in your ITR and the details in Form 26AS or Form 16/16A can trigger a notice.

> Not Reporting Foreign Assets or Income – Residents and Ordinarily Residents (ROR) must disclose foreign assets (e.g., bank accounts, shares, properties) and income in Schedule FA of the ITR, regardless of taxability. Non-disclosure can lead to a notices and penalties.

> False or Inflated Deduction Claims – Claiming deductions without proper documentation, such as fake rent receipts for House Rent Allowance (HRA) or ineligible deductions under Chapter VI-A, can attract scrutiny.

>Non-filing of return by those having High-Value Transactions – The IT Department collaborates with various government agencies to track individuals who incur high expenditures but fail to file ITR or underreport income. Certain transactions crossing specified monetary thresholds are classified as high-value or SFT (Statement of Financial Transactions) and must be reported by banks and other designated entities.

> Not Filing ITR When Mandatory – Individuals meeting the prescribed income thresholds or undertaking specific financial transactions are required to file their income tax return. Non-filing despite being eligible can lead to notices, interest, and penalties. Additionally, not filing may also restrict one’s ability to carry forward losses or claim refunds