5 common mistakes that you must avoid while filing your ITR

As the last date for filing the Income Tax Return (ITR) is inching closer each day, many taxpayers adhering to the Do It Yourself (DIY) are now in a tizzy as they file their returns themselves. Not relying on professional help has its own set of cons as individual taxpayers bear the brunt of filing their returns incorrectly.

Mistakes taxpayers make while filing their ITRs

There is a tendency to make mistakes while filling out the ITR, which is why watching them out to escape penalties and imprisonment becomes imperative.

Abhishek Soni, CEO-Tax2win, Fisdom says, “Last-minute rush often leads to mistakes; hence, completing the ITR filing takes some time. Here is the list of some common mistakes that may invalidate one’s ITR:

• Filing ITR using incorrect ITR form
• Incorrect personal information
• Filing incorrect and incomplete bank details
• Selecting the wrong Assessment Year
• Not reporting interest income from savings bank accounts, fixed deposits, etc.
• Mistakes in deductions and credits
• Late or non-filing
• Forget to verify the ITR.”

Filling in the incorrect ITR form

Despite personal finance websites listing the various ITR forms and the purpose for which they must be used, many taxpayers tend to file the wrong ITR. Filing the wrong form and submitting it results in the Income Tax Department will result in rejection of your tax claims.

Suresh Surana, Founder, RSM India added, “For the purpose of furnishing of tax return, the individual taxpayers would be required to choose between different ITR forms (ITR 1-ITR4) as applicable to them based on the type of income and residential status. Selection of the correct ITR form is vital as any tax return furnished using the wrong ITR form would be considered an invalid/ defective return.”

“The eligibility requirements for different ITR forms would generally depend on certain criteria such as the residential status, income levels, holding of any foreign assets, sources of income (such as passive income, capital gains, etc.), directorship/shareholding, etc,” added Surana.

Non-disclosure of income

Your tax liability depends on how much you earn every year, thus, mandating you to declare your income from all sources. Some people restrict their income disclosure to earnings from salary, business, or profession, capital gains, and sale of properties. Some people fail to account for the interest income on deposits made.

Failing to include any earnings may result in penalties and scrutiny by tax authorities. Similarly, it is important to utilize eligible deductions and exemptions outlined in different sections like Section 80C and Section 80D of the Income Tax Act, to decrease your taxable income.

Those having foreign assets from them must adhere to FEMA regulations. Also, you must disclose all information about income from foreign assets or your overseas businesses. Furthermore, when completing your tax return, it is important to remember to disclose all bank accounts, including those held abroad.

Submitting incorrect bank account details

How many times do taxpayers complain about not receiving their tax refunds on time? Have you noticed wherein you are asked to fill in the correct bank details for a refund to be paid, if any? How many of you have validated your bank account details after filling them up in the form? Submitting the wrong details means that the department will not be able to refund the amount back to your account.

Choosing the wrong assessment year

Do you know what is the assessment year (AY) for which you are filing your ITR form? Are you aware of the difference between a financial year (FY) and an assessment year (AY)? A common mistake made by many taxpayers is confusing the FY and AY, often considering them to be identical. This confusion can result in errors when filing their ITRs.

The AY follows the FY and is the period during which the income earned in the FY is evaluated and taxed. Both the FY and AY begin on April 01 and conclude on March 31. For example, in the case of FY 2022-23, the corresponding AY would be AY 2023-24.

Not verifying your ITR

Forgetting to verify your ITR details is a frequent mistake made during tax filing. Many taxpayers become aware of this error only after receiving a notice from the Income Tax Department. Correcting this oversight can be a cumbersome and expensive process.

Presently, taxpayers are granted one month to verify their ITR after submitting the completed form.

Aman Kumar Mittal, Chartered Accountant, Aman Kumar Mittal & Co said, “Mistakes while filing an ITR may expose an assessee to the risk of levy of penalty for wrong reporting of income and even concealment of income. While the mistake might be a bonafide one but to prove that you will have to litigate the matter. Since ITR is a self-certification form and any declaration is considered to be self-declared by the person filing the ITR form. Therefore, it is always advisable to get the ITR form filled out by a professional. Local tax consultants may also file the ITR but they may not have the expertise with the intricacies involved in the Income Tax laws.”

Individual taxpayers should maintain accurate records of essential documents such as Form 16, Form 16A, bank statements, investment proofs, and rent receipts for a minimum of six years. These records serve as valuable references, particularly in the event of audits or inquiries from tax authorities.