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What are the common mistakes while filing ITR?

When filing your Income Tax Return (ITR), it’s crucial to avoid common mistakes that could lead to penalties or complications. Here are some of the most frequent errors made by taxpayers:

  1. Filing ITR using Incorrect Tax Form: Every taxable person is required to report all their income sources, whether taxable or tax-exempt, using the correct ITR form applicable to them. If the ITR is filed using the wrong form, it will be termed as ‘defective.’ Choosing the wrong ITR form may lead to the return being treated as defective or make the ITR invalid altogether.
  2. Mentioning Incorrect Personal or Correspondence Details: Be vigilant while providing details such as your PAN, Aadhaar, address, email, and contact number. Ensure that these details match those in your PAN card. The Income Tax Department communicates through the address provided in the last ITR. Incorrect details may lead to communication issues and even ex-parte orders.
  3. Selecting the Wrong Assessment Year: Be clear about the difference between the “Assessment Year” and the “Financial Year.” The Assessment Year is the year following the Financial Year for which you are filing the return.
  4. Filing ITR Without Proper Verification: After e-filing your return, verify it using the appropriate method (e-verification or sending a signed ITR-V). Neglecting this step can render your return invalid
  5. Filing Incorrect and Incomplete Bank Details: Report all your bank accounts, including those with zero balances. Neglecting to do so can result in penalties.
  6. Not Reporting Interest Income from Savings Bank Accounts, Fixed Deposits, etc.: Declare all your income sources, including interest income from savings accounts, fixed deposits, and other investments. Omitting any income can lead to discrepancies and potential penalties.
  7. Not Reporting Income from the Last Job: If you changed jobs during the financial year, ensure that you report income from all jobs. Failing to do so can result in underreporting and complications.
  8. Not Reconciling Form 26AS Statement: Verify your Form 26AS (Tax Credit Statement) to ensure accurate reporting of income and taxes paid. Mismatched information can lead to complications.
  9. Not Checking Bank Statements: Review your bank statements to cross-check income, deductions, and TDS entries. Discrepancies can cause issues during assessment.
  10. Not Mentioning Exempted Income: Even if certain income is exempt from tax (such as agricultural income), it should be mentioned in the ITR. Failure to do so can raise questions during scrutiny.
  11. Ignoring Eligible Deductions and Exemptions: Take advantage of available deductions and exemptions to reduce your tax liability. Failing to claim them means paying more taxes than necessary.
  12. Late Filing or Non-Filing: Missing the due date for filing your ITR can result in penalties. Always file your return on time to avoid unnecessary hassles.
  13. Not Verifying Form 26AS and Form 16: Verify your Form 26AS (Tax Credit Statement) and Form 16 (TDS certificate) to ensure accurate reporting of income and taxes paid. Mismatched information can lead to complications.
  14. Incorrect Calculation of Tax Liability: Double-check your calculations to avoid errors in determining your tax liability. Incorrect calculations can lead to discrepancies.
  15. Not Providing Correct Bank Account Details for Refunds: Ensure that you provide accurate bank account details for receiving tax refunds. Incorrect details can delay the refund process.
  16. Not Disclosing All Assets and Liabilities: Declare all your assets (such as property, investments, etc.) and liabilities (such as loans) in the ITR. Concealing information can lead to penalties.
  17. Not Keeping Adequate Records: Maintain proper records of your financial transactions, investments, and expenses. Having organized records will help during the filing process and any subsequent scrutiny. 

Why is it important to avoid mistakes while filing ITR?

Filing your Income Tax Return (ITR) accurately is crucial for several reasons:

  1. Compliance with Tax Laws: Accurate ITR filing ensures compliance with tax laws, regulations, and reporting requirements mandated by the government. Failing to comply may lead to penalties, fines, or legal consequences.
  2. Avoidance of Penalties: Providing incorrect information or filing an inaccurate return can attract penalties from the tax authorities. These penalties can significantly impact your finances and overall tax liability.
  3. Validating Your Financial Details: ITR serves as a record of your income, deductions, and investments. It helps validate your financial details and ensures transparency. Any discrepancies may raise red flags and invite scrutiny from tax authorities.
  4. Claiming Refunds and Deductions: Accurate ITR filing allows you to claim eligible refunds and deductions. Mistakes can result in underutilization of tax benefits, leading to financial losses.
  5. Avoiding Legal Hassles: Incorrect ITRs can lead to legal hassles, including notices, audits, and even prosecution by the Income Tax Department. Timely and accurate filing helps you avoid unnecessary stress and legal complications.

In summary, avoiding mistakes while filing ITR is essential to maintain financial integrity, comply with tax laws, and safeguard yourself from penalties and legal troubles.

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April 2024