Income Tax Return FY2024-25: 10 ITR Filing Mistakes Which Can Cost You Dearly

Filing your income tax return (ITR) isn’t just about computing your income and tax; it is also about uploading a few documents on the income tax portal. A single error can delay your refund, attract notices from the Income Tax Department, or even result in penalties.

“Tax laws and ITR forms can be complex, and a layperson’s understanding may not be sufficient for accurate filing. Many taxpayers are unaware of how income-related information is mapped and reported. Annual changes to ITR forms often go unnoticed, leading to errors. Additionally, taxpayers may have to consider multiple sources to corroborate and for accuracy, for example, with respect to interest income, they may have to reconcile with bank statements, form 26AS, etc.,” says Sudhakar Sethuraman, Partner, Deloitte India.

This explains why even seasoned taxpayers must exercise caution while filing their tax returns. Here are some of the most common ITR filing mistakes that can cost you dearly.

Every taxpayer is required to use the correct ITR form while filing returns. The key criteria for a salaried individual when selecting the appropriate ITR form are based on their income level and sources of income, if any, beyond salary.

For example, “if a person earns less than Rs 50 lakh as salary income in a year, has income from one residential property, interest income from fixed deposits or savings accounts, then ITR-1 (Sahaj) is the correct form to file his return,” says Deepak Kumar Jain, Founder and CEO of TaxManager.in.

However, if the individual’s salary income exceeds Rs 50 lakh, they must file ITR-2. Additionally, if any person has income from capital gains or has more than one residential property, they must also file ITR-2, even if their total income is less than Rs 50 lakh.

“The tax return will be termed as defective if you use the wrong ITR form for return filing. It can lead to underreporting or misreporting of income and attract a penalty of up to 50 per cent and 100 per cent, respectively. Therefore, choosing the correct ITR form is essential,” advises Abhishek Soni, Co-Founder, Tax2Win.

To avoid this, understand your sources of income thoroughly and use the appropriate ITR form. Online filing platforms can help auto-select the right form based on your inputs.

At the time of filing your tax return, it is important to ensure that you enter the correct Assessment Year or AY for which you are filing the return. You are most likely to get an income tax notice or penalty if you mention the wrong Assessment Year. For example, for FY2024-25, AY will be 2025-26

While quoting their Permanent Account Number, Aadhaar number or address details, taxpayers need to be vigilant. Simple typos in your PAN, name, date of birth, or bank account details can create major issues. Your refund might not get credited, or your tax return might not be accepted. Your bank account should be active, pre-validated on the IT portal, and linked to your PAN. It is also important to provide the correct Bank Account Number and IFS code to receive a speedy refund from the Income Tax Department.

The Income Tax (I-T) Department has increased the reporting requirements in recent years. Taxpayers are now required to report their Virtual Digital assets and crypto income under Schedule VDA. Besides, taxpayers often fail to report their freelancing income, income from interest, investments, share trading, etc. “Failing to report all sources of income, irrespective of whether they are taxable or not, might attract notices and penalties. Review your AIS and bank statements thoroughly and report all taxable and exempt income accurately,” says Soni.

The TDS amount claimed in the tax return should match the TDS reflected in Form 26AS. Generally, taxpayers rely on Form 16, unaware about the fact that their employers might not have deposited the TDS or there might be errors in reporting. Therefore, always cross-check your Form 16 with Form 26AS before filing the return.

If you’ve changed your job during a financial year, it’s crucial to report income from all employers. Always collect Form 16 from every employer and report income while filing ITR. “When your salary income from different employers is calculated, there are chances that you might see a tax due because your new employer may not be aware of your previous job, and the tax computation may be miscalculated. Non-reporting can lead to scrutiny or demand notices. Therefore, always collect Form 16 from every employer and ensure that all salary income and corresponding TDS are included while filing your return,” informs Soni.

Claiming deductions U/S 80C, 80D, HRA, and others without adequate documentation can cause problems. In a bid to claim House Rent Allowance (HRA), fake invoices or rent receipts should not be submitted. The Income Tax Department has started cracking down on such deductions and is sending notices to taxpayers. You should, therefore, claim only the deductions for which you are eligible.

The responsibility for filing the tax return doesn’t end with filing the ITR only. You also need to verify the tax return within 30 days of ITR filing. Without it, the I-T Department will not process the tax return. By sending the ITR V (Acknowledgement) to CPC Bangalore by post, it can be verified offline. You can also e-verify it using your Aadhaar OTP, EVC, among others.

Claiming a deduction under Chapter VIA without adequate evidence can lead to the disallowance of such deductions and an increase in tax liability at the time of scrutiny assessment. Your case can be taken for income tax scrutiny for up to 6 years after the end of the year in which the return is filed. So, you need to keep all records for at least seven years.

Procrastinating on ITR filing can lead to financial penalties and loss of benefits. If you miss the deadline, you may face a late filing fee of up to Rs 5,000, interest on unpaid taxes, and lose the ability to carry forward certain losses like capital losses. To avoid this, start early, organise your documents in advance, and complete the tax filing process well before the deadline.