Mismatching Income with Official Records
One of the most common red flags for the Income Tax Department is a mismatch between the income you declare and the data it already has. Your Annual Information Statement (AIS) and Form 26AS contain a comprehensive summary of your financial activities
for the year, including salary, interest earned, and high-value transactions reported by banks and other institutions. Relying only on your Form 16 and ignoring other income sources like savings account interest, freelance gigs, or capital gains is a recipe for a notice. Before filing, meticulously cross-check your income details with your AIS and Form 26AS to ensure everything aligns.
Choosing the Wrong ITR Form
The tax department has different ITR forms for different types of taxpayers and income profiles. Selecting the wrong one is a fundamental error that can get your return marked as 'defective'. For instance, if you are a salaried individual with no business income, you would typically file ITR-1 or ITR-2. However, if you have income from capital gains, are a director in a company, or own more than one house property, ITR-1 is not for you. Using an incorrect form can lead to processing delays and a notice under Section 139(9), requiring you to refile.
Forgetting to Report All Income Sources
It's easy to focus on your primary salary and forget about smaller streams of income, but the tax department won't. You must declare all earnings, no matter how insignificant they seem. This includes interest from savings bank accounts, fixed deposits, dividends from shares or mutual funds, and any rental income. Even income that is exempt from tax, such as interest from a Public Provident Fund (PPF) or certain agricultural income, often needs to be reported in your return for disclosure purposes. The department's systems are designed to catch these omissions, so comprehensive reporting is your best defence.
Claiming Incorrect Deductions
Claiming deductions you are not eligible for or inflating deduction amounts is a direct path to scrutiny. Whether it’s deductions under Section 80C for investments, Section 80D for health insurance premiums, or House Rent Allowance (HRA), you must have valid proof for every claim you make. The department can ask you to furnish documents like rent receipts, investment proofs, and donation certificates. Claiming deductions without proper documentation or for which you don't meet the eligibility criteria can lead to penalties for under-reporting income.
Providing Incorrect Personal and Bank Details
A simple typo in your name, PAN, or bank account number can cause significant issues. Incorrect personal details can lead to your return being classified as defective. More importantly, providing the wrong bank account number or an account that is not pre-validated on the e-filing portal will delay or block your tax refund. Ensure the primary bank account selected for refund is linked with your PAN. All active bank accounts held during the financial year should also be reported to avoid potential scrutiny.
Forgetting the Final Step: E-Verification
Many taxpayers believe their job is done after they submit the ITR form. However, the process is only complete after you verify your return. You have 30 days from the date of filing to e-verify it. If you fail to do so, your ITR will be considered 'invalid', which is equivalent to not having filed it at all. This can lead to late-filing fees and other penalties. E-verification is a simple process that can be done online through Aadhaar OTP, net banking, or your bank account. Don't let this final, crucial step slip your mind.
