Missed deadline, wrong information: Errors to avoid in filing tax returns

Report all sources of income, including dividend and interest earnings

Over 35.8 million taxpayers had filed their income-tax returns (ITR) by July 19, 2024, according to the Income-Tax (I-T) Department. About 67.7 million ITRs were filed last year. 

As the July 31 deadline approaches, the pace of ITR filing will increase. It is crucial that this annual exercise is carried out carefully, as errors or incorrect information can lead to penalties or legal issues. Here are some common mistakes that tax filers must avoid:
 

Selecting wrong ITR form
 

Taxpayers must use the right ITR form. “If a taxpayer selects the wrong ITR form, their return will be deemed defective or invalid. Consequently, they will be subject to the same interest and penalties as those who fail to submit their return before the specified due date (under sections 234A and 234F of the I-T Act),” says Suresh Surana, a Mumbai-based chartered accountant.

Not checking Form 26AS
 

Form 26AS contains details of all taxes deducted or collected at source against a taxpayer’s Permanent Account Number (PAN). 
 

If there is any discrepancy in the Tax Deducted at Source (TDS) shown in Form 26AS, the taxpayer must inform the tax deductor and get it rectified. 

 

“The I-T Department, while processing ITR, relies on Form 26AS to give TDS credit. It may only allow the benefit of TDS claim if it is shown in Form 26AS,” says Rahul Singh, deputy general manager, Taxmann.
 

Not reporting all income sources

Taxpayers must report all sources of income, including salary, interest from savings accounts, rental income, capital gains, etc. 

“Omitting any income can attract scrutiny and penalties,” says Alay Razvi, partner at Accord Juris.
 

Not declaring interest, dividend income
 

Some taxpayers mistakenly believe they do not need to declare small amounts of interest or dividend income, thinking the government will not notice. The government collects extensive financial information. Failing to declare these incomes can result in a notice being issued. “Such omissions can be costly, as taxpayers will also need to pay interest on any additional tax due. Use the Tax Information Summary (TIS) generated on the income-tax portal to accurately report all interest and dividend incomes,” says Ankit Jain, partner, Ved Jain & Associates.
 

Inaccurate deductions and exemptions

Taxpayers who incorrectly claim deductions and exemptions can face issues. Ensure all claims under sections 80C, 80D, etc. are accurate and supported by proper documentation. “Deduction on interest income from savings bank accounts can be claimed up to Rs 10,000 under Section 80TTA. Employees not receiving house rent allowance (HRA) can claim a deduction for rent payments under Section 80GG. This is also available to self-employed individuals,” says Singh.

Skipping ITR verification


 

Verifying the ITR is crucial for complete tax filing. “Many taxpayers neglect this step, rendering their returns invalid and unprocessed. Verification confirms that the information provided in the ITR is accurate and complete,” says Devansh Jain, principal associate, PSL Advocates & Solicitors.
 

Taxpayers can verify their ITRs through several methods. The most common is electronic verification, wherein an Aadhaar one-time password (OTP) is sent to the registered mobile number linked with Aadhaar. Another efficient method is through net banking, where taxpayers can e-verify directly from their bank account. Alternatively, for those who prefer a physical approach, verification can be done by sending a signed physical copy of the ITR-V (Verification) form to the Centralised Processing Centre (CPC) office in Bengaluru.

Incorrect personal information

Errors in personal details like name, address, or PAN can lead to discrepancies and delays. “Double check all personal information before submitting your ITR,” says Amit Bansal, a chartered accountant and partner, direct tax, Singhania & Co.

Inaccurate bank account details

Another common error is entering incorrect bank account details. “Taxpayers must ensure that bank details, including the account number and IFSC code, are accurate and validated on the I-T portal. This validation confirms the details are correct and facilitates the smooth processing of refunds. Double-check your bank information and validate it online on the I-T portal before submitting your ITR,” says Ankit Jain.
 

Missing the deadline
 

A common mistake taxpayers make is missing the ITR filing deadline, which for individuals is July 31 of the assessment year.

“Penalties for delayed filing range from Rs 1,000 to Rs 10,000, depending on the duration of the delay. Additionally, individuals who file their ITR late may lose eligibility for certain deductions that could reduce their tax liability” says Devansh Jain.

For instance, deductions and exemptions under sections 10A, 10B, 80-IA, 80-IB, 80-IC, 80-ID, and 80-IE are not available if you delay ITR filing. Late filers may also face increased scrutiny and stringent assessments by the I-T Department.

Which ITR form is right for you?

ITR-1 (Sahaj)
 

Eligibility: Residents of India with total income up to Rs 50 lakh

Sources of income: Income from salary, house property, or other sources

Form 16: Can be used by salaried taxpayers to file ITR-1

ITR-2
 

Eligibility: Individuals and Hindu Undivided Families (HUFs)

Sources of income: Income from sources other than business or profession

Details: Income from salary, house property, capital gains, or other sources; profits or losses from stock transactions

ITR-3
 

Eligibility: Individuals and HUFs with income from a profession or proprietorship business

Sources of income: Income from salary, intraday trading of stocks or futures

Details: Suitable for individuals and HUFs earning from a profession or business (excluding partnerships)

ITR-4 (Sugam)
 

Eligibility: Indian residents, including HUFs, partnership firms, and individuals

Sources of income: Income from a profession or business

Source: Bankbazaar