There is an unusual hurry among taxpayers to fill in their income tax returns (ITRs) before July 31 this year. This has caused many of them to make mistakes inadvertently, thus, adding up to the myriad ITR errors. Erroneous filling up of the ITR forms results in a defective ITR and consequently, a notice from the Income Tax Department followed by a penalty.
Some of the common ITR filing mistakes must be avoided at all costs. These include:
Not meeting the deadline for submitting returns
The most common error is the failure to submit your income tax return (ITR) by the designated deadline. For individuals, this deadline is typically the 31st of July in the assessment year, unless an extension is granted by the government. Nonetheless, if you neglect to file your ITR by the due date, you will be subject to penalties, which include:
Failure to meet the deadline for filing returns can result in various consequences, including:
- Imposition of a late fee of up to ₹5,000.
- Accrual of penal interest at a rate of one per cent every month on any unpaid taxes.
- Delays in receiving refunds for excess tax paid.
Refraining to file ITR
Choosing not to file your ITR form can lead to more serious ramifications. Failure to file your ITR may expose you to penalties. The potential consequences of such legal actions can be substantial and encompass the following:
- Accrual of penal interest on outstanding tax liabilities, calculated from the due date until the actual filing of the ITR.
- Imposition of a penalty amounting to approximately 50% of the tax evaded, in addition to the applicable tax payable.
Filling in the wrong ITR form
Using an incorrect ITR form is a prevalent error while filing tax returns.
Not pre-validating your bank account
Neglecting to pre-validate your bank account can have consequences when filing income tax returns. It is essential to pre-validate your bank account, particularly if you anticipate a tax refund for any surplus tax paid. Failure to do so will result in the Income Tax Department being unable to credit the owed income tax refund to you.
Not verifying your ITR
Overlooking the verification of your income tax return (ITR) is a frequent mistake during the tax filing process. Often, individuals become aware of this oversight when they receive a notice from the Income Tax Department. Correcting this error can be both time-consuming and expensive.
Presently, taxpayers are granted a 30-day window to verify their ITR after submitting the completed ITR form.
Sharing wrong personal information
Occasionally, individuals make errors while providing crucial personal information in their ITR forms.
Opting for the wrong assessment year
It is common for taxpayers to mix up the terms “Assessment Year” and “Financial Year”. The "financial year" pertains to the period in which income is earned, whereas the Assessment Year corresponds to the year following the financial year when tax returns are filed. Hence, for the ongoing tax filing, the appropriate choice would be the assessment year 2023-24.
Not showing income from all sources
While filing ITR forms, it is of utmost importance to declare all sources of income. Even if you are a salaried individual, there may be additional income derived from various sources, including rental income from residential or commercial property, interest earned from savings or fixed deposit accounts, dividends received from equity shares, capital gains, and other potential avenues. Taxpayers must disclose and provide details of all these income sources when filing your ITR, regardless of whether such income is exempt from taxation.
Not disclosing income from all employers
Furthermore, if you have changed jobs within the financial year, it is important to include and disclose the income received from both your current and previous employers in your ITR.
Ignoring income from capital gains/losses
A significant number of tax filers tend to overlook reporting capital gains and losses when submitting their ITRs. However, this oversight can lead to severe repercussions.
Under existing tax regulations, it is mandatory for taxpayers to disclose any capital gains or losses when filing their ITRs. In the past, detecting the omission of capital gains was a challenging task for tax authorities. Nevertheless, with enhanced systems and improved capabilities, tax authorities are now more proficient in identifying such omissions.