Common Mistakes to Avoid While Filing ITR

This Blog is written by Suruchi Singh.

Introduction

ITR stands for Income Tax Returns. ITR is a form that is filed by individuals, businesses, and other entities to the Income Tax Department of India to declare their income and pay taxes. The ITR form that you need to file depends on your income, sources of income, and the type of entity you are.

Filing an income tax return is a requirement in India if your income exceeds a threshold amount. The Income Tax Act stipulates different amounts for individuals, Hindu Undivided Families (HUFs), companies, partnership firms, and other entities. The form that must be submitted is determined by the kind of taxpayer, the type of income, and other elements.
ITR submission is required by law and aids in tax assessment and collection for the government. Additionally, it gives taxpayers a way to disclose their income, make deductions, and use any tax-related benefits.

In India, Income Tax Return (ITR) filing is mandatory for anyone earning an income above the taxable limit. Until recently, the process of filing an ITR was a tedious and time-consuming task that involved visiting the Income Tax Department’s office. However, with the advent of technology, it is now possible to file income tax returns online. In this comprehensive guide, we will discuss everything you need to know about income tax filing, including the benefits of e-filing income tax returns.

Benefits of E-Filing Income Tax Returns

E-filing income tax returns has several advantages over the traditional method of filing returns. Here are some of the benefits of e-filing ITR-

• Convenience

One of the most significant advantages of e-filing income tax returns is the convenience it offers. The entire process of e-filing can be completed from the comfort of your home or office, without the need for any physical paperwork.

• Time-Saving

E-filing income tax returns saves a lot of time as it eliminates the need for manual submission of documents. With e-filing, the entire process is automated, and the returns can be filed in a matter of minutes.

• Accuracy

E-filing income tax returns ensures a higher level of accuracy as it eliminates the possibility of human errors. The online portal checks for errors and discrepancies, and prompts the user to correct them before submitting the returns.

• Faster Processing

E-filing income tax returns leads to faster processing of returns, as the entire process is automated. Once the returns are filed, they are processed within a few days, and the refund is credited to the bank account of the taxpayer.

Steps for filing ITR online

Filing ITR online is a simple and hassle-free process. There are the following steps for filing ITR online-

Step 1: Register on the Income Tax e-Filing Portal

To file ITR online, the first step is to register on the Income tax e-filing Portal. Visit the official website of the Income Tax Department and click on the ‘Register Yourself’ option. Fill in the required details, including your PAN, name, date of birth, and contact details.

Step 2: Log in to the Portal

Once you have registered on the portal, log in using your PAN as the user ID and the password you created during registration.

Step 3: Download the Appropriate ITR Form

The next step is to download the appropriate ITR form based on your income and filing status. The forms are available in Excel and Java format.

Step 4: Fill in the Required Details

Fill in the required details in the ITR form, including your personal details, income earned, deductions claimed, tax paid, and other relevant information.

Step 5: Validate the Form

Validate the form to check for errors and discrepancies. The online portal checks for errors and prompts the user to correct them before submitting the returns.

Step 6: Upload the Form

Once the form is validated, upload the form on the portal by clicking on the ‘Submit’ button. You will receive an acknowledgment receipt on successful submission.

List of documents Required for E-Filing Income Tax Returns

• PAN Card
• Aadhaar Card
• Bank statements
• Form 16 (if employed)
• Form 26AS
• Investment details
• Home loan details (if applicable)
• Capital gains details (if applicable)

Errors should be avoided when submitting the ITR

Income tax returns should be filed carefully because even a tiny error can get you into serious difficulties with the Income Tax Department. You can wind up with a penalty or probably a tax notice. Making mistakes when filing an income tax return renders the return invalid and may subject the filer to fines and legal action. It can be difficult or simple to file an income tax return. Filing income tax returns (ITR) is an important responsibility for every taxpayer in India. It not only helps you stay compliant with the law but also enables you to claim various deductions and exemptions available under the Income Tax Act. However, many taxpayers make mistakes while filing their ITR, which can lead to penalties and other legal consequences. In this blog post, we will discuss the common mistakes to avoid while filing ITR in India.

There are some common mistakes to avoid while filing ITR-

1. Failing to report all sources of income- It is important to report all sources of income, including interest income, rental income, and capital gains, while filing your ITR.

2. Incorrect personal details- Ensure that you enter your personal details such as name, PAN, and contact information correctly.

3. Not verifying ITR correctly– Make sure to verify ITR within the stipulated time frame to avoid penalties.

4. Choosing the incorrect ITR form- Select the correct ITR form based on your income sources and nature of income.

5. Not keeping proper documentation- Maintain proper documentation of all income sources, deductions, and investments to avoid discrepancies in your ITR.

6. Not declaring exempt income- Even if you have exempt income such as dividends or long-term capital gains, it is important to declare it in your ITR.

7. Not claiming deductions- Ensure that you claim all eligible deductions such as Section 80C, 80D, and 80G while filing your ITR.

8. Not reporting foreign assets- If a person have foreign assets, make sure to report them in your ITR as per the Foreign Account Tax Compliance Act (FATCA) guidelines.

9. Failing to disclose all bank accounts- Disclose all bank accounts held by you, including those that are inactive or closed.

10. Not filing ITR on time- File ITR within the due date to avoid late filing fees and interest charges.

Some additional tips for filing your ITR accurately

• Gather all the necessary documents and information before starting to file ITR. This includes Form 16, bank statements, investment statements, and any other documents that you need to claim deductions or exemptions.
• Take proper time and carefully fill out the ITR form. Do not rush through the process.
• Choose the correct ITR form that applies to your income category.
• Fill in the required details such as personal information, income details, deductions, tax payments, etc.
• Verify the information provided and calculate the tax payable or refund due.
• Pay any outstanding tax dues (if applicable).
• Submit the ITR form online through the Income Tax Department’s e-filing portal or offline by physically submitting the form at the nearest Income Tax Office.
• Receive an acknowledgment receipt from the Income Tax Department after the successful submission of the ITR.

Conclusion

Avoiding these common mistakes while filing your ITR can help you stay compliant with the law and avoid penalties and legal consequences. It is always advisable to seek professional assistance if you are unsure about any aspect of your tax returns. In India, submitting income tax returns (ITR) can be a difficult process, and even a minor mistake or omission can have serious repercussions.

Remember that submitting an ITR that is properly prepared and devoid of errors not only protects you from potential fines or inspection but also enables you to minimise your tax liability and claim all allowable deductions, thereby guaranteeing that you are in conformity with all applicable tax laws.
Spend some time learning about the ITR filing procedure, keeping up with the most recent regulations, and utilising the resources offered to you if you want to handle this yearly obligation successfully. You may speed up your tax filing process, find peace of mind, and maintain good relations with the tax authorities by avoiding frequent blunders.

FAQs

1. What are some common tax filing mistakes that individuals should avoid when filing ITR?

   • Individuals should avoid common tax filing mistakes such as providing incorrect bank account details, using the wrong form, failing to report all sources of income, and missing out on tax deductions.

2. Why is it important for taxpayers to provide accurate bank account details when filing ITR?

   • Taxpayers must provide accurate bank account details because they are crucial for receiving income tax refunds. Incorrect bank details can lead to delays and complications in refund processing.

3. Can individuals file ITR with incorrect bank details?

   • Filing ITR with incorrect bank details can be a costly mistake as it may result in delayed refunds or even non-receipt of refunds. Taxpayers should ensure they provide the correct bank account information.

4. What should salaried individuals keep in mind when they file their income tax return?

   • Salaried individuals should ensure that they report their income from salary, including any salary arrears, and claim applicable deductions such as medical expenses and HRA to reduce their taxable income.

5. Are there specific forms for reporting income from different sources?

   • Yes, taxpayers should use the correct form applicable to their income sources to avoid incorrect assessment, such as when reporting income from investments, business income, or capital gains.

6. What is the deadline for filing an income tax return?

   • Individual taxpayers must file their income tax return by the due date, which is usually July 31st of the assessment year, to avoid penalties and interest charges.

7. What should senior citizens take into account when they file their ITR?

   • Senior citizens should ensure that they provide complete and accurate details of their income, including income from savings accounts, investments, or pension, and consider relevant deductions to reduce their tax liability.

8. Why is it essential for individuals to maintain proper financial records when filing ITR?

   • Maintaining proper records is crucial for accurately reporting income and expenses. It helps in ensuring correct assessment and prevents the filing of defective returns, which may lead to income tax scrutiny.

9. What are the consequences of an incorrect assessment by the I-T department?

   • An incorrect assessment can result in a tax demand notice and additional tax liability. It’s crucial for taxpayers to file ITR with utmost care and provide accurate details to avoid such negative impacts.

10. Can dormant accounts or foreign bank account impact income tax filing?

    • Yes, reporting dormant accounts and foreign bank accounts correctly in ITR is crucial. Failure to do so can lead to complications and scrutiny by the tax authorities.

11. What is the concept of clubbing incomes, and why is it important for individuals to understand it?

    • Individuals should understand the concept of clubbing incomes, especially when income is attributed to another taxpayer, such as a minor child. Understanding this concept is crucial to avoid incorrect reporting and taxation.

12. How can individuals ensure that they receive the correct assessment of their tax liability?

    • To ensure the correct assessment, individuals should maintain complete and relevant documents, report all sources of income accurately, use the correct income tax return form, and consult a tax professional if needed.

13. What should taxpayers do if they receive a tax demand notice from the I-T department?

    • If taxpayers receive a tax demand notice, it’s essential to respond promptly. This can involve either paying the outstanding tax or filing an appeal if they believe the demand is incorrect. Consulting a tax consultant can be beneficial.

14. What steps can individuals take to keep their finances on track for tax planning?

    • Individuals can maintain proper financial records, budget effectively, invest in tax-saving instruments, and regularly review their financial plan to stay on track for tax planning and achieving their financial goals.

15. Are there any budgeting mistakes that individuals should avoid when planning for taxes?

    • Budgeting mistakes to avoid include not accounting for emergency funds, neglecting everyday expenses, and not considering the impact of taxes on investments and returns over time.

16. How can individuals ensure that they educate their children about financial literacy and responsible wealth management?

    • It’s essential for parents to educate their children about financial planning, types of insurance plans, and the importance of budgeting from an early age to promote responsible financial management.

17. What role does life insurance play in tax planning?

    • Life insurance plans offer tax benefits under various sections of the Income Tax Act. Understanding these benefits can help individuals optimize their tax planning strategies.

18. What is Tax Deducted at Source (TDS), and how does it affect tax filing?

    • Tax Deducted at Source (TDS) is a deduction made at the source of income, and it affects the taxable income of individuals. Taxpayers should ensure that they report TDS accurately in their ITR to avoid discrepancies and possible tax demands.

19. How can individuals ensure that their taxes comply with direct and secretarial regulations for their business?

    • To ensure compliance with direct tax and secretarial regulations, individuals should consider consulting a professional or a consulting firm with expertise in business compliance.

20. What are the potential consequences of filing a defective return?

    • Filing a defective return can lead to income tax scrutiny and penalties. To avoid this, taxpayers should provide complete and accurate details in their ITR.

21. Are there any options for pre-filled data available when filing income tax returns?

    • Some platforms may offer options for pre-filled data in certain fields, but taxpayers should review and verify this data for accuracy before submitting their return.

22. What steps can be taken to avoid double taxation on income?

    • To avoid double taxation, individuals can claim relief under Double Taxation Avoidance Agreements (DTAA) and ensure that they report their foreign income accurately.

23. How does the sale of assets or equity shares impact income tax filing?

    • The sale of assets or equity shares may result in capital gains income. It’s crucial to report such gains accurately and choose the correct form applicable to capital gains.

24. Can excessive deductions or exemptions have a negative impact on tax filing?

    • Excessive deductions or exemptions can lead to incorrect assessment and may trigger income tax scrutiny. It’s important for taxpayers to claim only those deductions and exemptions for which they are eligible.

25. Where can individuals find information on the applicable slab rates for income tax filing?

    • Information on applicable slab rates can be found on the official website of the Income Tax Department or in the relevant income tax laws and notifications. It’s essential for taxpayers to be aware of the current tax brackets.