Filing your Income Tax Return (ITR) can often feel like navigating a maze of rules and regulations. However, making mistakes on your tax return or any compliance oversight can lead to penalties, delays, or even an audit by the tax authorities. Many do-it-yourself tax filers make mistakes in their returns, leading to notices from the tax department.
In this blog, we have collated some common mistakes you should avoid when filing your income tax returns. Avoiding these mistakes and double-checking your return before submission can ensure a smooth tax filing process.
Let’s discuss further:
- Not Linking Your PAN to Aadhaar Card: One common mistake taxpayers make is failing to link their Permanent Account Number (PAN) to their Aadhaar card. The government of India has made it mandatory to link PAN with Aadhaar to file ITR and complete various financial transactions. Failure to do so may result in penalties imposed by the Income Tax and difficulties in completing financial transactions. Linking PAN with Aadhaar helps verify your identity and facilitates faster processing of tax refunds. To link your PAN with Aadhaar, you can visit the Income Tax Department’s official website or use other designated methods provided by the government. Ensure that your personal information matches across both documents to avoid any discrepancies.
- Incorrect Personal Information/Bank Details
One of the most basic yet crucial mistakes is entering incorrect personal details such as name, PAN Card (Permanent Account Number), address, or bank details. Double-check all personal information before submitting your return to ensure accuracy. Similarly, providing incorrect bank details for tax refunds can lead to delays or even non-receipt of refunds. Ensure all your details are accurate and up-to-date.
- Mismatch in Form Selection
Taxpayers often make the mistake of selecting the wrong ITR form for their income sources. Each form is designed for specific types of income, so ensure you choose the appropriate form based on your income sources to avoid discrepancies.
- Not Disclosing Other Income Sources or Exemption Income
Failing to disclose all sources of income is a common mistake. Whether it’s income from salary, rental properties, investments, or freelance work, ensure you report all income accurately to avoid penalties for underreporting. Also, remember that income such as dividends from certain investments or interest earned on tax-free bonds may be exempt from tax but still needs to be reported in your ITR. Ensure you include all exempt income to avoid discrepancies.
- Ignoring TDS Details
Tax Deducted at Source (TDS) details must be correctly reported in your ITR. Ensure that you include all TDS deductions from your employers, banks, or any other deductors. Cross-check the details with your Form 26AS to avoid any discrepancies.
- Not Reconciling Form 26AS
Form 26AS is a consolidated statement that contains details of tax deducted on your behalf and tax deposited by you. Failure to reconcile the details in Form 26AS with your ITR can lead to inconsistencies and potential notices from the tax department.
- Forgetting to Claim Deductions
Tax deductions can significantly reduce your taxable income, but many taxpayers forget to claim them. Take advantage of Section 80C, 80D, 80G, etc. deductions, and keep all necessary documents handy to support your claims.
- Not Filing Within the Deadline
Missing the filing deadline for your ITR can result in penalties and interest charges. To avoid such consequences, file your return on time, preferably well before the due date. After filing your return, stay vigilant for any tax notices or communications from the tax department. Ignoring or delaying response to such notices can lead to further complications.
For the latest updates on ITR filing deadlines and other important announcements, please visit the official Income Tax e-Filing portal. Check the portal regularly for any updates regarding filing deadlines and compliance requirements.
- Choosing Tax Slabs – Old vs New Regime: One significant decision taxpayers face is choosing between the old and new tax regimes. Each regime comes with its own tax slabs and deductions, making it crucial to assess which one aligns better with your financial situation. Under the old tax regime, taxpayers can avail of various deductions and exemptions, such as Section 80C (investment in specified instruments), Section 80D (health insurance premium), and others. Tax slabs are progressive, with different rates applicable to different income brackets.
The new tax regime offers reduced tax rates but eliminates most deductions and exemptions available under the old regime. Tax slabs are simplified, with lower rates applicable across income brackets.
Here’s a comparison to help you make an informed decision:
| Income Bracket | Old Tax Regime (%) | New Tax Regime (%) |
|---|---|---|
| Up to ₹2.5 lakhs | Nil | Nil |
| ₹2.5 lakhs to ₹5 lakhs | 5% | 5% |
| ₹5 lakhs to ₹7.5 lakhs | 20% | 10% |
| ₹7.5 lakhs to ₹10 lakhs | 20% | 15% |
| ₹10 lakhs to ₹12.5 lakhs | 30% | 20% |
| ₹12.5 lakhs to ₹15 lakhs | 30% | 25% |
| Above ₹15 lakhs | 30% | 30% |
Tax Deductions Available in ITR
Here are some common deductions you can avail of while filing your Income Tax Return (ITR):
| Deduction | Applicability |
|---|---|
| Section 80C | Investment in specified instruments such as PPF, EPF, ELSS, etc. |
| Section 80D | Premium paid towards health insurance policies |
| Section 80G | Donations to specified charitable institutions |
| Section 24(b) | Interest paid on home loan |
| Section 80E | Interest on education loan |
| Section 80TTA | Interest on savings account |
| Section 80CCD(1B) | Additional deduction for investment in NPS beyond Section 80C limit |
These deductions can significantly reduce your taxable income, lowering your tax liability. Explore all available deductions and claim those applicable to your financial situation.
Ensuring a smooth tax filing experience isn’t just about ticking boxes—it’s about safeguarding financial integrity. Your vigilance in avoiding common mistakes is the cornerstone of a stress-free tax season.
For businesses, integrating standardised practices and innovative tech measures like the ITR verification API is the key to optimising efficiency, ensuring accurate filings, and maintaining compliance with confidence.
Benefits of ITR Verification API to Businesses
Overall, the ITR verification API offers numerous benefits to businesses and companies, including time savings, accuracy, integration capabilities, cost savings, compliance, security, scalability, and enhanced experience. It makes the tax filing process more efficient and streamlined.
- Time-saving for Bulk Verification: For businesses and companies with multiple employees or entities, verifying individual tax returns manually can be time-consuming. The ITR verification API automates this process, saving valuable time for tax professionals and HR personnel who would otherwise have to verify each return manually. Businesses can verify tax returns in bulk and process a large volume of returns quickly and efficiently. This is especially beneficial for companies with a large workforce or multiple subsidiaries, where verifying individual returns manually would be impractical.
- Accuracy: Manual verification of tax returns can be prone to errors, leading to discrepancies and potential penalties. By automating the verification process, the API ensures greater accuracy and consistency in verifying returns, reducing the risk of errors and ensuring compliance with tax regulations.
- Compliance & Data Security: Ensuring compliance with tax regulations is crucial for businesses and companies to avoid penalties and legal issues. The ITR verification API helps businesses stay compliant by providing a standardised and transparent verification process, reducing the risk of non-compliance and associated consequences. The API employs robust security measures to protect sensitive information, ensuring data privacy and safeguarding against unauthorised access and data breaches.
If you are unsure about any aspect of your tax return, consider seeking professional advice to ensure compliance with tax laws and regulations.
