In India, the annual routine of filing income tax returns (ITR) is an essential task for taxpayers. Gathering and verifying documents such as Form 16, Aadhar Card, Capital Gains Statements, Form 26AS, and Interest Certificates is a part of the process. However, in the hustle to assemble these documents, taxpayers often make mistakes that complicate their ITR filing.
Don’t worry; we’re here to help. Filing income tax returns can feel overwhelming, but it doesn’t have to be. With the right information, guidance, and meticulousness, you can navigate this process without unnecessary hassles. By steering clear of common errors, you can avoid undesired penalties and legal complications, regardless of whether you’re a salaried individual, a self-employed professional, or a business owner.
Common Income Tax Return Filing Mistakes and How to Avoid Them
Selecting the Incorrect Tax Form
Ensure that you report all your taxable and non-taxable income correctly. It’s crucial to use the right ITR form for this. For instance, as a salaried individual, you’ll need to use Form ITR-1 or ITR-2, depending on your income and investments. Selecting the wrong form may lead to rejection by the Income Tax Department or flawed filing.
Also, if you have capital gains income, using the incorrect form could mean losing out on investment deductions or paying excessive taxes. The same holds true for self-employed individuals: using the wrong form might result in a loss of business-related deductions or credits.
Missing the Filing Deadline
Remember, individual taxpayers not undergoing tax audits need to file their ITR by July 31st. For those subject to tax audits, the extended deadline is October 31st. Businesses needing a Transfer Pricing (TP) report have until November 30th.
Filing your ITR past these dates could result in financial penalties, interest charges, and potential legal consequences. The Income Tax Department can impose a penalty of up to Rs. 10,000 for late filing, depending on the delay and tax liability.
To evade penalties or legal complications, it’s wise to consult with a professional well before the due date of your ITR filing.
Not Cross-Checking Form 26AS
Form 26AS records the taxes your employer, banks, or other parties have collected and deposited with the Income Tax Department. It also includes information about advance tax, self-assessment tax, and tax refunds received during the year.
Cross-checking this statement with your other tax documents is essential to verify that all reported information is accurate and complete. Any mismatch could lead to additional taxes, interest, penalties, or even rejection by the Income Tax Department.
Providing Incorrect Personal Information
Filing your ITR involves providing accurate personal details. Incorrect PANs (tax identification numbers), wrong email addresses, or incorrect bank account numbers or IFSC codes might seem trivial but can result in your filing getting rejected, penalties, and delays in tax refunds.
Failing to Declare Exempt Income
Even if your income is exempt from tax, it must be declared in your ITR if your gross income exceeds Rs 2.5 lakh. Even if your total income falls below the taxable limit, declaring exempt income is important. Doing so aids in the computation of your future total income as tax authorities base this year’s tax liability on the total income reported last year. Moreover, declaring exempt income also allows you to reconcile your total declared income with the total reported by your employers, banks, or others.
Providing Incomplete Bank Details
Make sure the bank account details you provide are correct as the refund process can only start if these details are accurate. These details include your name, account number, IFSC code, and address.
Submitting incomplete bank details can also hinder the tax department’s communication with you. All tax notices, refund intimations, and other updates related to your ITR will be sent to your registered email address and mobile number.
Neglecting to Verify Your ITR
Forgetting to verify your ITR could deem it invalid, leading to penalties and interest charges. Moreover, the tax department will only initiate your refund, if any, once your return has been verified.
Omitting to Disclose Interest Earned on Savings Accounts
It’s critical to declare any interest earned from your savings accounts, fixed or recurring deposits. This is added to your total income and is taxable. Non-disclosure could lead to a notice from the Income Tax Department, resulting in penalties and interest charges.
Also, the Income Tax Department cross-verifies the information provided in your ITR with the data they receive from banks and financial institutions. If there is a mismatch between the information you provide and the data from your bank or financial institution, your ITR may be subject to scrutiny or rejection.
Key to a Hassle-Free ITR Filing Experience
Filing income tax returns is a vital responsibility for Indian taxpayers. It not only ensures your compliance with the law but also offers various benefits like claiming refunds, applying for loans, and building your financial credibility.
However, ITR filing can be complicated, and even small errors can lead to significant repercussions. Avoiding income tax return filing mistakes is key to a smooth and trouble-free ITR filing experience. Therefore, make sure to file your ITR accurately and seek professional guidance if needed.
Stay on top of your game and evade the common ITR filing errors we’ve discussed. Further, you can approach chartered accounts to get more information on ITR filling in Patna.
