Picking the Wrong ITR Form
This is one of the most fundamental yet common errors. The Income Tax Department offers multiple forms (ITR-1 to ITR-7), each designed for specific taxpayer profiles based on their sources of income. For instance, a salaried individual with an income up
to ₹50 lakh and one house property can use ITR-1 (Sahaj). However, if you have any income from capital gains (like selling stocks or mutual funds), foreign assets, or are a director in a company, you cannot use ITR-1 and must opt for ITR-2 or ITR-3. Filing the wrong form can lead to your return being treated as 'defective', which may cause processing delays or require you to file a revised return.
Ignoring All Income Sources
Many taxpayers diligently report their salary income from Form 16 but forget to include other earnings. The tax department requires you to declare all income, no matter how small. This includes interest earned on savings bank accounts (where interest above ₹10,000 is taxable for individuals), fixed deposits, and rental income. Even income that is tax-exempt, like earnings from a PPF account or agricultural income above ₹5,000, must be reported. With the Annual Information Statement (AIS) tracking your financial transactions, any non-disclosure is easily flagged and can result in a notice.
Not Reconciling with Form 26AS and AIS
Before you file, it is crucial to cross-check the details in your ITR with your Form 26AS and Annual Information Statement (AIS). Form 26AS is your tax passbook, showing details of tax deducted at source (TDS) by your employer, bank, and others. The AIS provides a comprehensive view of all your financial transactions reported by various entities. A mismatch between the income you declare and the data in these forms is a major red flag for the tax department. It can lead to lower refunds or an unexpected tax demand if the TDS credit you claim doesn't match government records. Always download and verify these documents from the e-filing portal first.
Claiming Inaccurate Deductions
While maximizing tax savings is important, claiming deductions for which you are not eligible or don't have proof can be costly. Taxpayers should carefully verify the conditions for deductions under sections like 80C, 80D (health insurance), and HRA before claiming them. For example, you must have actual proof of investment or expenditure to back your claims. Misreporting deductions or fabricating claims can be classified as misreporting of income, which can attract a hefty penalty of 200% of the tax payable on that income. It's always better to claim only what you are genuinely entitled to.
Forgetting to Pre-Validate Your Bank Account
If you are expecting an income tax refund, this is a step you cannot afford to miss. For a refund to be credited to your account, the bank account must be pre-validated on the income tax portal and linked with your PAN. An unvalidated account or one with incorrect details (like a mistyped account number or IFSC code) will lead to refund failure. The process is simple and can be done online through the e-filing portal. Ensuring your primary bank account is validated saves you the hassle of following up on a delayed refund.
Filing but Not Verifying Your Return
Many people believe that clicking the 'submit' button is the final step. However, your ITR filing is considered incomplete and invalid until it is verified. The law requires you to verify your return within 30 days of filing. If you miss this deadline, your return is treated as if it was never filed, which can lead to late-filing fees and other penalties. The easiest way to verify is through an Aadhaar-based OTP, which takes just a few minutes. You can also use net banking or a pre-validated bank account to generate an Electronic Verification Code (EVC).
