Ignoring Form 26AS and AIS
Many salaried employees believe their Form 16 is the only document needed for ITR filing. This is a significant error. Your Form 16 only contains salary details from one employer. The Income Tax Department, however, also has your Annual Information Statement
(AIS) and Form 26AS. These documents consolidate data from various sources, including TDS on salary, interest from bank deposits, dividend payouts, and capital gains from selling shares or property. If the income you declare doesn't match the information in your AIS and Form 26AS, it can trigger an automated notice from the tax department. Before filing, always download and reconcile all three documents to ensure you report all income accurately.
Choosing the Wrong ITR Form
Selecting an incorrect ITR form is a fundamental mistake that can render your return 'defective'. This means the tax department may not process it, leading to delays and potential penalties as if you never filed at all. For instance, the simple ITR-1 (Sahaj) form is for resident individuals with a total income up to ₹50 lakh from salary, one or two house properties, and other sources like interest. However, if you have any capital gains from selling mutual funds or shares, or have foreign assets, you are generally required to file ITR-2. If you have income from a business or profession, ITR-3 would be applicable. Carefully assess all your income sources before starting the filing process to choose the correct form.
Forgetting Income from Other Sources
Relying solely on your Form 16 often leads to under-reporting of income. Salaried individuals frequently forget to include interest earned from savings accounts and fixed deposits. While savings account interest up to ₹10,000 is deductible for individuals, it must be reported first. Other commonly missed incomes include rental income, earnings from freelance gigs, or capital gains. Since banks and financial institutions report these transactions to the tax department, any omission on your part creates a data mismatch that is easily flagged, potentially resulting in a tax notice and a demand for the tax due, plus interest.
Not Combining Income After a Job Change
If you switched jobs during the financial year, you would have received two or more Form 16s. A very common and costly mistake is to file your ITR using only the Form 16 from your current employer. You must consolidate the income from all employers. Each employer deducts TDS based on the salary they pay, often applying standard deductions and tax slabs independently. When you combine the salaries, your total income might push you into a higher tax bracket, and the total TDS deducted might be insufficient. Failing to report all salaries can lead to significant tax liability, plus interest for underpayment.
Incorrectly Claiming Deductions
Many taxpayers miss out on legitimate deductions, while others claim deductions for which they are not eligible, both of which are costly errors. It's crucial to claim all deductions you are entitled to, such as those under Section 80C (for investments in PPF, ELSS, life insurance), Section 80D (for health insurance premiums), and HRA (if applicable under the old tax regime). However, ensure you have proof for all deductions claimed. The new tax regime, which is the default option, offers fewer deductions, so it is important to know which regime you are in and what benefits are available. For example, under the new regime, you can claim a standard deduction of ₹75,000 from your salary but cannot claim HRA or most Section 80C deductions.
Failing to Verify Your Return
A surprising number of taxpayers believe their job is done after hitting the 'submit' button. However, an ITR is considered invalid if it is not verified. The tax department provides 30 days from the date of filing to complete the verification process. This can be done electronically through an Aadhaar OTP, net banking, or by sending a signed physical copy of the ITR-V acknowledgment to the Centralised Processing Centre (CPC) in Bengaluru. If you don't verify your return in time, it will be treated as if it was never filed, which can lead to late-filing penalties.
