What are the common mistakes made while filing ITR?

Some of the common mistakes made while filing income tax return are:

  • Filing ITR using Incorrect Tax Form

    Every taxable person is required to report all his income sources that are taxable and tax-exempt using the correct ITR form applicable to him/her. If the ITR is filed using the wrong form, then the return will be termed as 'defective'. The taxpayer can determine the applicability of the form, depending on the source of income he/she has earned. Choosing the wrong ITR form may lead the return to be treated as defective or make the ITR Invalid altogether. Therefore, choosing the correct ITR form is critical.

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  • Mentioning incorrect personal or correspondence details

    Taxpayer should be vigilant while quoting the PAN, Aadhaar and address details. Special attention should also be given at the time of mentioning the mail id and contact number. You need to ensure that the details tally with those given in your PAN. Income Tax Department will send the Notices on the address given in the last ITR, if you do not provide the correct address then the same will be served on the incorrect address by way of Chaspa and will pass the ex-party orders. So it's important to provide the correct address. It should also be noted that ITR-V will be sent on the email id which is given in the ITR. Reminder Text for E-Verification and Intimation text will be sent on the mobile number which is given in the ITR. Therefore, it is important to ensure that you provide the correct details to avoid any further confusion in future. It is also important to provide the correct Bank Account Number and IFSC code so as to receive the speedy refund by the Income Tax Department.

  • Filing incorrect and incomplete bank details

    Every year a large number of refunds are not processed for incorrect personal details like name, bank account number, IFSC code and address. Many taxpayers unintentionally provide wrong bank details & these common mistakes in filing income tax returns can delay your income tax refund. The Income Tax Department transfers all income tax refunds directly to the bank account. Therefore, always share correct bank account details for income tax return of an active account. Unlike previous years a taxpayer now is also required to report about the details of all the bank accounts held by him during the year.

  • Not reporting interest income from Saving bank accounts, Fixed deposits etc.

    Due to lack of awareness many of the taxpayers fail to mention or report about these under the head- ‘Income from other sources’ in the tax returns. The savings account income is taxable when it exceeds Rs.10,000 annually. The interest received has to be first mentioned in the head ‘Income from other sources’ and then deduction on savings account interest can be claimed under section 80TTA, if you are below 60 years of age.

    However, senior citizens or a super senior citizen will be able to claim a deduction upto Rs. 50,000 under section 80 TTB from the total interest income earned in a financial year. It should be noted that FDR interest will also be included in this.

    People usually have a misconception that an FD is taxable only when it is matured, however the information about the interest income needs to be reported every year to the ITD under the head ‘Income from other sources’. The interest credited into the taxpayer’s account can be checked by him using the FDR statement.
    In case of fixed deposits, when TDS is deducted for interest credited by the bank, the same can be claimed in ITR, when it comes in the taxpayer’s form- 26AS statement.

  • Not reporting income of last job

    If an individual has switched jobs in a financial year then the same must be reported while filing ITR along with income from current job. A discrepancy will be shown in the TDS certificate and form 26AS, if any of the income is left unreported. In the new format of Form 16, a separate row is given where the income from another employer needs to be mentioned, if any.

  • Not reconciling Form 26AS statement

    Form 26AS provides an insight into the TDS deducted and deposited to the Income Tax department in a person’s name. It also provides details about the TCS collected and taxes which are being paid during the financial year against the PAN number.

    All incomes included in Form 26AS must be reported, as these details are already there with the tax department. In case of any mismatch, the tax filer may be sent a notice. A mismatch in Form 26AS and Form 16 may also lead to lesser refunds received by the taxpayer.

  • Not checking the bank statements

    All incomes received during a particular year are required to be mentioned in income tax return, hence one should always check his/ her bank statement to consider the amount of any gift received, any interest received or any other income received. Nowadays, since ITR forms require mentioning the number of all operative bank accounts, it becomes imperative to mention the exact incomes received accurately.

  • Not mentioning exempted income

    According to the Income tax laws, a taxpayer needs to report all his income, whether exempt from tax or not. It is mandatory for a taxpayer to file Income tax returns if his gross income exceeds Rs. 2.5 lakh [ i.e. basic exemption limit] . Exempt incomes are not taxable, however, not mentioning about the same would invite notices from the income tax department.

    Some examples -
    1. Dividend income from shares and mutual funds taxable in the hands of the recipient at the applicable income tax slab rates to the individual. So, the individual should not forget to include the dividend income in the ITR. However, this income will remain exempt [upto Rs. 10 lakh], if the taxpayer has received the dividend income in FY 2019-20. The taxpayer can show the dividend income in the Exempt Income Schedule at the time of filing the ITR of F.Y. 2019-20.
    2. If you sell the house and invest the consideration received to purchase the other house then capital gain is exempt as per the Section 54 of the Income Tax Act, 1961. However, one must disclose this transaction properly in the ITR.
    3. Income from a life insurance policy which is tax free under Section 10(10D) or Gift received from the relatives like father, mother, brother or sister are exempt. Still all these incomes must be reported in the tax form.
  • Not reporting interest received on income tax refunds

    Interest received on
    Income Tax refunds can be traced from Form 26AS and should be reported as income from other sources while filing your Income Tax Return.

  • Failure to E-Verify ITR V

    Responsibility of filing the tax return doesn’t end with filing of ITR only. It is compulsory to verify the return within 30 days of filing as without it, the Income Tax Department will not process your tax return. You can verify ITR V offline by sending the ITR V (Acknowledgement) to CPC Bangalore using post or e- verify using Aadhaar OTP, EVC etc.

    Most people fail to do so. Without verification of ITR V, your tax return will not be considered as filed & notice stating your return as “Invalid” will be sent by the department. If you fail to respond to the notice within the time allowed, it will be considered that you have never filed a return by the income tax department. Hence, all penalties and non filing fees will be applicable on non-filing of ITR.

  • Not clubbing incomes

    According to the Income Tax Act, there are certain instances where the taxpayer is required to club the income of his minor child or spouse with his own income and pay taxes accordingly. A minor is a child below the age of 18 years when earning an income, the same needs to be clubbed with the income of the parents. However, an exemption of Rs.1500 is given by the income tax department on each child. For Example In case an FD is made in the name of a child, the interest income received should be reported to the income tax department by the Parent of the child.

  • Late Filing of income tax return

    ‘All ends that ends well’ might not be correct in case of income tax return filing. If an income tax return is submitted after the due date, it is as good as filing an income tax return within the due date, But in case of delay in ITR filing, certain rights are deprived. Losses cannot be carried forward to the next year. Late filing fees will be applicable. Extra Interest will also be payable in case of tax liability. Refund procedure also gets delayed.

  • Not keeping evidence of deductions claimed in income tax return

    For all expenses/ investments claimed as deduction under Chapter VIA (Children Tuition fees, LIC, PPF, Medical Insurance Policy etc.), maintenance of records/ evidences/ proofs of expenses/ investments is required. Claiming deduction without adequate evidence in hand can lead to disallowance of such deductions and increase in tax liability at the time of scrutiny assessment. So either have evidence for a particular expense/ investment, or else don’t claim deduction of it. Your case can be taken for Income tax scrutiny for upto 6 years after the end of the year in which the return is filed. So, records need to be kept for 7 years.

  • Failure to account for more than two property

    If an individual owns multiple house properties, then any two of his house property will be considered as self occupied, as per their choice and the remaining will be considered as ‘ deemed to be let out’.

    This means that when a person owns three properties, any one of the property, even if remains vacant for the entire year and does not provide any financial gains to the taxpayer, shall still be considered to be taxable. The taxpayers potential to earn gains shall be considered and tax will be levied on the annual value calculated as per the provision of law.

  • Non-filing of income tax returns

    A person is mandatorily required to file income tax return even if his income is below the taxable limit in case he owns any assets abraod.
    For instance If you’ve pursued education from abroad, then it’s a must to open a bank account in that country. Many times it so happens that, the students come back to India & withdraw money from the foreign bank account but don’t close it. In case if such a bank account is still not closed, then the individual will not be able to file ITR 1, rather he will be asked to use ITR 2 and furnish the complete details of such bank accounts. So, one should make sure that all such bank accounts are closed timely.
    Therefore, these types of special disclosures are mandatory & any non-disclosure may bring notice from the Income Tax Department.

  • Not Paying Advance Tax/ Self-Assessment Tax

    Normally, TDS is deducted on the Salaried Income and Interest income received from the Bank. However, at times, it happens that the taxpayer falls in the 30% tax bracket and TDS on interest income is deducted at the rate of 10% or not deducted at all. So in such a case tax needs to be calculated which is payable additionally and needs to pay as a advance tax. Also, in case of Rental income, assess the tax liability and advance tax needs to be paid as per the provisions of the law. Self-Assessment tax is paid at the time of filing of return. And all the details of self assessment tax paid and advance tax paid need to be entered in the Income Tax Return filed.

  • Not reporting capital gains on switching units of mutual funds

    These transactions are not reflected in the bank statements and so do not find a mention in the Income tax return. The profit earned on such transfers are left unreported as they are not routed through the bank account of the taxpayer. As switching or shifting from a particular scheme to another may result in profit or loss, therefore it is advisable to report the same in the Income Tax Return.

  • Submitting Fake Invoices/ giving wrong disclosure

    Fake bills mainly related to the deductions in accordance with Section 80C / 80D etc of the Income tax law such as LIC receipts or medical bills or rent receipts etc. Fake invoices / rent receipts to claim HRA (House Rent Allowance) should not be submitted. There have been instances where despite lesser cost of actual bills individuals overstated the value of the bills.
    These false bills can easily be tracked down by the Income Tax department by checking the bank details or by cross enquiring from the vendor / landlord etc.

  • Filing ITR using Incorrect Tax Form

    Every taxable person is required to report all his income sources that are taxable and tax-exempt using the correct ITR form applicable to him/her. If the ITR is filed using the wrong form, then the return will be termed as 'defective'. The taxpayer can determine the applicability of the form, depending on the source of income he/she has earned. Choosing the wrong ITR form may lead the return to be treated as defective or make the ITR Invalid altogether. Therefore, choosing the correct ITR form is critical.

  • Not linking PAN with Bank Accounts

    It is important to link PAN with your Bank Account Number because in case there is a refund, the same gets credited to your bank account. Your bank account details need to be validated on the income tax website so as to get the refund.

  • Not submitting Requisite Forms

    To claim certain exemptions, the taxpayer needs to file some forms before the filing of returns. For instance, if you have received salary arrears in the financial year and need some relief for the increased tax liability under section 89(1), then form no 10E needs to be filed. Another instance is when a taxpayer wants to claim foreign tax relief then filing Form 67 is required. To claim these exemptions or benefits, you need to file these forms before filing the income tax returns. Failure to fill these forms will result in the individual not being able to claim the relief. This will also increase the chances of receipt of tax notice.

  • Not Determining correct Residential Status

    Incorrect determination of one’s residential status is one of the most common tax filing mistakes. The residential status has two parameters 60 days and 182 days. The first thing the taxpayer needs to do is get the residential status right, as this determines the scope of income that will be taxable in India. For instance in case of a resident person, all their income including foreign income is taxed in India. However, incase of non-resident, only their income accruing or arising or deemed to be arising in India is taxed.

  • Not claiming correct deductions

    Some donations are 100% allowed but others are only 50% allowed. Same like certain returns on investments are tax free while others are taxable. Hence such deduction should be claimed with caution to avoid scrutiny form the income tax department.

Why is it important to avoid mistakes while filing ITR?

Income tax returns should be filed with utmost care because a small mistake while filing return can land you in deep trouble with the Income Tax Department. You could end up getting penalised or even be served a tax notice. For instance, if a taxpayer file the income tax return in a wrong form, i.e if an individual files ITR using a form which is not applicable to him then the tax officer, while processing the ITR form, may consider the return so filed as a defective return under the provision of section 139(9) of the Income Tax Act and send the notice u/s 139(9) as defective return notice.

Frequently Asked Questions

Q- What if I have filled a wrong ITR form?

Ans. If an individual files a wrong ITR form then the return may be treated as defective or make the ITR invalid altogether. Therefore, choosing the correct ITR form is critical. You can revise and correct the ITR till the end of the relevant assessment year. Else, correct this as soon as you receive the Notice of Defective Return from the Income Tax Department.

Q- Is it possible to edit an ITR which is submitted?

Every taxpayer is entitled to revise his income tax returns under section 139(5) to provide correct information to the Income tax department. Also, a taxpayer who has filed the belated returns will also be allowed to revise it before the end of the relevant A.Y. Earlier, belated ITRs were not allowed to be revised.

Q- Is there a penalty for revised ITR?

According to the current Income Tax laws, there is no penalty or fees for revising the income tax return.

Q- How many times can I revise the return?

There is no restriction on the number of times an income tax return can be revised. However, this needs to be revised before the end of the relevant assessment year.

Q- Can we revise income tax returns if the original ITR is Invalid?

An invalid return would mean that you have not filed the ITR for a particular assessment year. In that case, you would be required to file the ITR again as a belated return because your original one is treated as invalid.

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.