Ignoring Form 26AS and AIS
Relying solely on Form 16 is one of the biggest errors a salaried taxpayer can make. Your Form 16 only contains details provided by your employer. The Income Tax Department, however, has a far more comprehensive view of your finances through your Annual
Information Statement (AIS) and Form 26AS. These documents contain details of all your financial transactions, including interest from savings accounts and fixed deposits, dividend income, and capital gains from mutual funds or stocks. Not reconciling the information in your ITR with your AIS and Form 26AS is the single biggest trigger for automated notices, as any mismatch is easily flagged by the department's systems.
Choosing the Wrong ITR Form
Most salaried individuals with an income up to Rs 50 lakh and one house property use ITR-1 (Sahaj). However, this form has strict eligibility criteria. You cannot use ITR-1 if you have any capital gains, income from more than one house property, or any foreign assets or income. Using the wrong form can lead the tax department to declare your return as 'defective'. This can result in processing delays, loss of deductions, and a higher chance of scrutiny from tax authorities. It is crucial to check which ITR form applies to your specific income profile before you begin filing.
Not Reporting All Sources of Income
Many salaried individuals forget to declare income that falls outside their monthly salary. This is a frequent cause of receiving a tax notice. Common sources of missed income include interest earned on savings bank accounts and fixed deposits, dividend income from shares or mutual funds, and any income from freelance work. While you can claim a deduction of up to Rs 10,000 on savings bank interest under Section 80TTA, you must first report the interest as 'Income from Other Sources'. Failing to report all income streams, no matter how small, constitutes underreporting of income and can lead to penalties.
Errors in Claiming Deductions
Claiming deductions without proper eligibility or documentation is a significant risk. This is especially common with House Rent Allowance (HRA) and investments under Section 80C. For HRA, you must have a valid rent agreement and proof of payment, such as bank transfer records. If your annual rent exceeds Rs 1 lakh, providing the landlord's PAN is mandatory. Similarly, many people claim deductions under Section 80C for investments they declared to their employer but failed to actually make. The tax department can and does verify these claims, and incorrect filings can result in the deduction being disallowed and a tax demand being raised.
Forgetting to Consolidate Income After a Job Change
If you switched jobs during the financial year, you must report the income from all employers in your ITR. Each employer issues a separate Form 16 and calculates TDS based on the salary they paid, often applying the basic exemption limit. When you combine the salaries, your total income might push you into a higher tax slab, resulting in a shortfall of tax paid. A common mistake is to file a return using only the Form 16 from the final employer. You must consolidate the income from all Form 16s to calculate your final tax liability and pay any balance tax due to avoid interest and penalties.
Not Verifying Your Return
Many taxpayers believe that clicking 'submit' on the portal is the final step. It is not. After submitting your ITR, you must e-verify it within 30 days. An unverified return is treated as invalid, which is equivalent to not having filed a return at all. This can lead to late filing fees and other penalties. The verification process is simple and can be done electronically through various methods, including Aadhaar OTP, net banking, or your bank account. Forgetting this final, crucial step nullifies all the effort you put into filing correctly.
