As the deadline for filing your Income Tax Return (ITR) approaches on September 15, many taxpayers are finalizing their returns, while others are still in the process of filing. If you haven’t submitted your ITR yet, it’s crucial to avoid common mistakes that could delay your refund or lead to legal trouble.
To ensure smooth filing, it’s recommended that taxpayers share all necessary documents with their tax consultants at least one week before the due date to prevent last-minute errors. In this article, we explore five common mistakes taxpayers often make during ITR filing and how to avoid them.
1. Choosing the Incorrect ITR Form
One of the most frequent mistakes taxpayers make while filing their Income Tax Return is selecting the wrong ITR form. The ITR form you choose depends on your sources of income and other factors. For example, a taxpayer with income from salary, house property, and other sources may opt for ITR-1 (Sahaj). However, if you have income from capital gains, foreign income, or business/profession, you must use ITR-2 or another relevant form.
Failing to select the appropriate form can lead to incorrect filing and penalties. Ensure youverify your sources of income before choosing the correct ITR form.
For detailed guidance on the different ITR forms, visit Income Tax Department for comprehensive resources.
2. Failing to Disclose Foreign Assets
Another significant mistake many taxpayers make is not disclosing foreign assets in their ITR. According to the Income Tax Department, it is mandatory for taxpayers with foreign assets or income to report them in their returns. This includes bank accounts, property, shares, and any other financial assets held abroad.
Non-disclosure of foreign assets can result in hefty penalties, and in extreme cases, legal action. It is important to ensure full transparency in your tax return to avoid issues later.
If you’re unsure about how to disclose foreign income or assets, consult a tax expert for assistance.
3. Reporting Multiple Form 16s Incorrectly
Salaried individuals who work for more than one employer during the financial year might receive multiple Form 16s. However, many taxpayers fail to aggregate income from all their employers correctly, leading to underreporting of income.
Taxpayers must ensure that they report all sources of income, including income from multiple employers, accurately in their ITR. This is particularly important if you have switched jobs or worked part-time while also holding a full-time position.
If you’re unsure how to combine income from multiple Form 16s, a tax consultant can help ensure everything is correctly reported.
4. Not Disclosing Exempt Income
Many taxpayers mistakenly believe that exempt income such as gratuity, leave encashment, or commuted pension does not need to be disclosed in the ITR. However, exempt income should be included in your gross salary, with the relevant exemptions claimed under Section 10 of the Income Tax Act.
Not reporting exempt income can lead to notices under Section 133(6) or Section 148A to explain the source of funds, especially if you use the exempt income for investments like FDs or property purchases.
Make sure to include all exempt income in your ITR and claim the appropriate exemptions to avoid complications with the tax authorities.
5. Using AIS/TIS Data Without Verification
With the introduction of Annual Information Statement (AIS) and Taxpayer Information Summary (TIS), taxpayers have easier access to their financial data, including information on TDS, income, and other deductions. However, using this data without proper verification can lead to errors in your filing.
Some taxpayers blindly copy the information from AIS/TIS without cross-checking it. Always verify the data provided in AIS/TIS and ensure that it matches your actual income and deductions. Also, double-check if you have opted for the correct tax regime (old vs. new tax regime) as this could affect your overall tax liability.
Conclusion: Final Tips for Smooth ITR Filing
With only a few days left before the ITR filing deadline, it is crucial to avoid these common mistakes to ensure your tax return is filed accurately. Here are some quick tips to help you avoid errors:
- Consult a Tax Expert: Share all your financial documents with your tax consultant at least one week before the deadline to avoid last-minute glitches.
- Verify Your Form: Double-check that you’re using the correct ITR form for your income sources.
- Check Foreign Assets: Ensure that you report any foreign income or assets you hold.
- Aggregate All Income: If you have multiple employers, ensure you combine your income correctly from all Form 16s.
- Verify AIS/TIS Data: Always cross-check the information from your AIS and TIS before filing.
To learn more about ITR filing and stay updated on the latest tax rules, visit Income Tax India
