This Article deals with the some of the common mistakes while filing Income Tax Returns (ITR) in India, which might lead to refund/rebate rejections.
Filing Income Tax Returns (ITR) is a crucial financial obligation for taxpayers in India. However, many individuals and businesses make errors that can lead to penalties, scrutiny, or even legal repercussions. Below are 50 common mistakes taxpayers make while filing ITR, along with references to relevant Indian tax laws:
Basic Errors
- Choosing the Wrong ITR Form – Using an incorrect ITR form can lead to rejection under Section 139(9).
- Filing ITR Under the Wrong Assessment Year – Mistakes in AY can cause discrepancies in tax records.
- Incorrect PAN or Aadhaar Number – This can result in the return being invalid as per Section 139A.
- Not Linking Aadhaar with PAN – As per Section 139AA, failure to link Aadhaar with PAN may lead to PAN deactivation.
- Failure to Verify ITR – Returns must be verified within 30 days, failing which they are considered invalid.
- Not Filing ITR if Income is Below Taxable Limit but Required to File – Certain conditions (e.g., foreign travel, electricity bill over ₹1 lakh) mandate filing under Rule 12.
Income Declaration Errors
- Not Reporting Interest Income – Interest from FDs, savings accounts, and bonds must be declared under Section 56.
- Failure to Report Income from Previous Employer – Leads to underreporting and attracts scrutiny under Section 143(1).
- Not Including Rental Income – Rental income must be declared under Section 22.
- Omitting Agricultural Income Above ₹5,000 – Though tax-exempt under Section 10(1), it must be reported.
- Ignoring Income from Investments in Spouse’s Name – Clubbing provisions under Section 64 apply.
- Non-Declaration of Foreign Income & Assets – As per the Black Money Act, failure results in penalties and prosecution.
- Ignoring Income from Freelancing or Side Gigs – Freelance income must be declared under Section 44ADA.
- Not Reporting Dividend Income – As per Section 10(34), dividends above ₹5,000 are taxable.
- Non-Disclosure of Capital Gains – Sale of shares, property, or mutual funds attracts tax under Sections 111A and 112A.
Deduction and Exemption Errors
- Claiming Deductions Without Supporting Documents – Deductions under Sections 80C, 80D, etc., need proof.
- Incorrect Claiming of HRA – House Rent Allowance (HRA) exemptions under Section 10(13A) require proof of rent paid.
- Duplicate Deductions for Home Loan – Deductions under Sections 80C and 24(b) need proper categorization.
- Incorrectly Claiming LTA (Leave Travel Allowance) – LTA exemption applies only to domestic travel under Rule 2B.
- Failure to Claim Deductions Under 80G for Donations – Donations must be made to eligible funds.
- Overstating Business Expenses – Excessive claims under Section 37(1) may trigger scrutiny.
- Claiming Exemptions on Ineligible Investments – Not all investments qualify under Section 80C.
TDS and Advance Tax Errors
- Mismatch in TDS Details with Form 26AS – Differences can lead to tax demands.
- Failure to Claim TDS Refunds – Taxpayers often forget to claim excess TDS deductions.
- Ignoring Advance Tax Payment – As per Section 208, failure to pay advance tax results in interest under Sections 234B and 234C.
- Incorrect TDS Calculation on Freelance Income – Must be deducted under Section 194J or 194C.
- Non-Declaration of TCS (Tax Collected at Source) – TCS details should match Form 26AS.
Filing Process Errors
- Filing ITR Without Checking Form 26AS & AIS – Mismatches can cause tax notices.
- Not Disclosing Bank Accounts – As per Rule 114B, all bank accounts except dormant ones must be declared.
- Errors in Bank Details for Refunds – Incorrect details can delay tax refunds.
- Filing ITR with Incorrect Residential Status – Residential status determines tax liability under Section 6.
- Failure to Opt for Presumptive Taxation Correctly – Under Sections 44AD, 44ADA, incorrect opt-in can lead to higher taxes.
Other Compliance Errors
- Not Filing ITR for NRI with Indian Income – NRIs earning income in India must file returns.
- Delay in Filing Revised Returns – Revisions under Section 139(5) must be done before the due date.
- Ignoring Rectification Requests – Errors in processed ITR should be corrected under Section 154.
- Failure to Pay Self-Assessment Tax – As per Section 140A, unpaid tax before filing may lead to penalties.
- Failure to Disclose GST Turnover in ITR – GST taxpayers must ensure proper reconciliation.
- Not Mentioning Capital Gains Exemptions Correctly – Sections 54, 54F, etc., require proper documentation.
- Non-Filing of Audit Report for Businesses – Tax audit under Section 44AB is mandatory for eligible businesses.
- Late Filing Leading to Penalties – Late filing under Section 234F attracts a penalty of up to ₹5,000.
- Not E-Filing for Mandatory Cases – As per Rule 12, high-income taxpayers must e-file returns.
- Incorrect Filing of ITR for Trusts and Societies – NGOs must file under Section 12A and 80G compliance.
- Not Reporting ESOPs and Foreign Stock Options – ESOP gains are taxable under Section 17(2).
- Failure to Disclose Agricultural Land Sale Transactions – Capital gains rules apply to urban agricultural land.
- Non-Compliance with New Tax Regime Selection – Must be opted for explicitly under Section 115BAC.
- Failure to Report Crypto Transactions – Gains from cryptocurrency are taxable under Section 115BBH.
- Ignoring Changes in Address and Contact Details – Incorrect details may cause communication gaps with the IT department.
- Not Keeping Proper Financial Records – As per Section 44AA, businesses must maintain records for six years.
- Failure to Track Tax Notices & Responses – Notices under Sections 143(1), 148, 245 must be addressed promptly.
- Ignoring Compliance with Section 269ST on Cash Transactions – Large cash transactions exceeding ₹2 lakh in a single day are prohibited.
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