ITR Filing AY 2024-25: Top Mistakes to avoid for smooth Filing of Income Tax Return
Filing income tax returns is a necessary annual process that most people are familiar with. However, many individuals tend to procrastinate and leave it until the last minute, which can result in delays or errors in their returns.
This is particularly common among taxpayers with income from various sources such as salary, house property, capital gains, foreign income, crypto gains, etc. It is crucial for salaried individuals who failed to choose the old tax regime in April 2023 or those who changed jobs during the financial year to be cautious while filing their returns due to the complexities involved. In case of any uncertainty, it is advisable to seek help from professional chartered accountants or tax consultants.
Here are seven common mistakes that taxpayers should avoid to ensure a hassle-free filing process.
1. Claiming Deductions for which you are ineligible
Tax refunds can be claimed for illicit means since there is no need for formal proof of document to be attached when filing Income tax returns. However, taxpayers frequently claim bogus deductions under sections 80G or 80U, which could result in Income tax notices. Annual information statements, as well as AI technology, aid in confirming accuracy. Filing ITR truthfully prevents potential problems.
2. Data from Form-16 and Form-26AS are not reconciled
Before filing your taxes, visit the Income tax department’s e-filing portal and download Form-26AS and the Annual Information Statement. Ensure that the tax deducted at the source (TCS) and immovable property transactions match with Form-16, bank TDS certificates, and other financial records. If mismatches occur, contact the tax deductor for clarification and adjustments.
3. Choosing the incorrect ITR Form
If you file returns by selecting an incorrect form, say ITR-2 is relevant for you as per your income sources and you choose ITR-1, you may be seen as concealing income and transactions that should have been reported in ITR-2.
Let’s take an example – Suppose you have a net capital gain via the sale of stocks or have a foreign bank account in the year 2023. This information can’t be disclosed via form ITR-1 and you need to file ITR-2.
Filing of wrong ITR could result in tax notices from the department and a “defective” return.
4. Hiding earnings from a prior employer
Change jobs during the financial year and have two Form-16 from each employer. Declare all income received and make any necessary deductions. If your ITR is incomplete, you may receive tax notices for failing to declare all income.
5. Using Form-16 only for filing returns
Form-16 is required for salaried employees to file returns, however, it does not reflect all income and transactions. For example, interest earned on a savings account, profits on stocks or mutual fund units are also taxable, although the same are not there in Form 16. Using Form-16 alone as a key document may result in non-disclosure of income. Review bank statements, capital gain statements issued by broking houses and intermediaries of mutual funds, and AIS to verify and disclose accurate information.
6. Not Pre-validating bank account
Pre-validated bank account information ensures that you receive refunds of income tax, if any, on time. There could be a delay if your bank information was wrong and not Pre-Validated. Before filing your taxes, ensure that the account number, IFSC, bank name, and other details on your ITR form are valid.
7. Don’t forget the procedure for ITR verification
The ITR filing method not only involves uploading and submitting returns online, but, they must be verified within 30 days for it to be processed by the Income tax department. This is possible using a variety of mechanisms, including Aadhaar, pre-validated bank accounts, and demat accounts. It is advised that you execute this verification process concurrently with the ITR filed. If verification is not completed within 30 days, the verification date will be treated as the submission date of ITR, resulting in late filing fines of Rs. 5,000 or Rs. 1,000 in case of income less than Rs. 5 lakh.
