Common Mistakes to Avoid While Filing Income Tax Returns Online

Income Tax Returns, or ITR, are an essential component of financial compliance for taxpayers in many jurisdictions. These returns are filled out to report income, deductions, and tax liabilities through an online platform. Failing to file ITR accurately and on time can lead to legal issues, penalties, and other complications. Below, we highlight some of the most common mistakes taxpayers should avoid to ensure their returns are legally valid and error-free.

Claiming Fake Deductions and Exemptions

Filing an ITR is a critical responsibility for taxpayers. One of the frequent errors is claiming fake deductions or exemptions to reduce tax liabilities artificially. This can lead to penalties and legal repercussions from the income tax department. It is crucial to be honest and accurate in all claims. For instance, taxpayers should not under-report their income to evade taxes, as this is considered tax fraud and can result in severe penalties.

Failing to Check Form 26AS and AIS/TIS

Another common mistake is filing ITR without checking Form 26AS and AIS/TIS. These forms are essential for verifying income details and tax deductions. Form 26AS provides an annual summary of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) payments to the taxpayer, while Form 16 provides summarized information from employers. Mismatch in income and tax deductions with these forms can lead to errors in the ITR and possible discrepancies with the tax authority. It is therefore important to ensure that all income and deductions are accurately represented and reconciled with these forms.

Neglecting to Report All Sources of Income

Many taxpayers fail to report all sources of income, often due to oversight or lack of awareness. This includes exempt income such as PPF interest, agricultural income, and income from the sale of securities and mutual funds (capital gains and dividend income). Additionally, income from the sale of immovable property, rental income from house property, and interest from NRE/NRO accounts should also be reported. Failing to report these sources of income can lead to discrepancies between what is reported and what is recorded by the tax department, potentially leading to audits and penalties.

Selecting an Incorrect ITR Form

Selecting the incorrect ITR form is another common error. The type of ITR form to be used depends on the heads of income and the applicability of the form. For instance, if a taxpayer has income from multiple sources, such as salary, business income, and capital gains, the appropriate ITR form should be selected to avoid any irregularities. Incorrectly choosing the form can result in rejection by the tax department and may require additional effort to rectify the mistake.

Non-Disclosure of Information

Taxpayers should always disclose all relevant information, including holding positions as a director in any company or LLP and ownership of unlisted equity shares. Non-disclosure of such information can lead to legal issues and penalties. It is essential to provide a comprehensive and accurate picture of one's financial status to the tax department to avoid any unauthorized investigations or implications.

Ignoring the Deadline for Filing ITR

Timely filing of ITR is crucial. For financial year 2021-2022, the deadline for ITR filing for taxpayers whose accounts do not need to be audited is July 31. Filing late can result in the loss of carry-forward of certain losses, such as trading losses and capital gains losses, for the subsequent year. Ignoring the deadline can also lead to interest and penalties. It is therefore important to ensure that the returns are filed within the stipulated time frame to avoid any unintended consequences.

Conclusion: Accurate and timely filing of ITR is paramount for maintaining a clean financial record and avoiding any legal complications. Taxpayers should ensure they are fully aware of the requirements and adhere to them religiously. By avoiding these common mistakes, taxpayers can ensure that their returns are processed smoothly and without any issues.