Avoid These Filing Mistakes to Prevent Notices in FY 2025-26
- Rajesh Kumar Kar
- Aug 20
- 10 min read
Filing your Income Tax Return (ITR) correctly is crucial to ensure you are compliant with tax regulations and avoid penalties. However, mistakes in the process are common and can lead to complications such as delays in processing, penalties, and in some cases, audits. Common errors during the ITR filing process can affect your refund processing, require the filing of revised returns, and even attract fines. Let us understand the most common mistakes made during the ITR filing process, including choosing the wrong form, inaccurate income reporting, failure to verify bank account details, and more. By being aware of these mistakes, you can take steps to avoid them and ensure a smooth and accurate filing experience.
Table of Contents
Choosing the Wrong ITR Form
One of the most common mistakes when filing ITR is selecting the wrong ITR form. There are several ITR forms designed to cater to different types of income sources and taxpayers. For example, ITR-1 is for salaried individuals with income from salary, pension, and interest, while ITR-3 is for individuals or Hindu Undivided Families (HUFs) with income from business or profession. Choosing the incorrect form can lead to rejected returns, delays, and the need to file revised returns. It's important to ensure that the form you select accurately reflects your income sources to avoid complications and penalties.
Not Verifying Bank Account Details Properly
Bank account details are crucial when filing an ITR, especially for ensuring the smooth processing of refunds. Taxpayers are required to provide accurate bank account details, including the account number and IFSC code, so that any tax refunds can be directly credited. Failing to verify these details or providing incorrect information can result in the delay or rejection of refunds. In some cases, the tax authorities may also require you to update your bank details before your refund can be processed, which can further delay the process.
Incomplete or Inaccurate Reporting of Income
Accurate income reporting is essential for a hassle-free ITR filing process. This includes all forms of income such as salary, business income, capital gains, and income from other sources. A common mistake is underreporting income, either unintentionally or deliberately, which can lead to penalties and legal issues. Additionally, not reporting all income sources or incorrectly calculating the total income can result in discrepancies, delays in processing, or even tax audits. Ensure that you have all the necessary documents, such as salary slips, bank statements, and investment details, to report your income correctly.
Not Cross-Checking Form 26AS and AIS
Form 26AS and the Annual Information Statement (AIS) provide a detailed summary of your income, tax payments, and deductions, as reported by employers, banks, and other financial institutions. Cross-checking these forms before filing your return is crucial, as discrepancies between the information in these forms and the details in your ITR can result in mismatches, leading to delays, penalties, or even scrutiny. Ensure that the tax deducted at source (TDS) and other tax payments are correctly reflected in these forms, and match the amounts while filing your ITR.
Ignoring Changes in Tax Regime and Deductions
The Indian government frequently updates tax laws, including changes to tax slabs, deductions, exemptions, and even the tax regime itself. These modifications can have a substantial impact on your tax liability, and overlooking them while filing your Income Tax Return (ITR) could result in overpaying taxes or losing out on potential tax savings. A prime example of this is the introduction of the new tax regime, which offers an alternative to the traditional tax structure. This regime, while offering lower tax rates, comes with the trade-off of forgoing most exemptions and deductions.
Understanding the Tax Regimes: Old vs. New
India's income tax system includes two main regimes that taxpayers can choose from when filing their returns: the old tax regime and the new tax regime.
Old Tax Regime: Under the old tax regime, taxpayers can claim various deductions and exemptions such as:
80C (deductions for investments in PPF, ELSS, etc.)
Interest on home loans under Section 24(b) These deductions significantly reduce your taxable income, allowing you to save on taxes. However, the tax slabs in the old regime are comparatively higher than those in the new tax regime.
New Tax Regime: Introduced as an alternative to the old regime, the new tax regime offers lower tax rates but does not allow the usual exemptions and deductions. Taxpayers opting for the new tax regime cannot claim:
Deductions under Section 80C, Section 80D, etc.
Exemptions like HRA and LTA (Leave Travel Allowance)
Interest on home loans under Section 24(b)
The new regime is more simplified as it eliminates many of the tax-saving options available under the old regime. However, it is only beneficial for individuals who have relatively low deductions and exemptions to claim. If your deductions are substantial, staying in the old tax regime could save you more money.
Why Ignoring the Tax Regime Can Be Costly
Choosing the wrong tax regime or ignoring updates to the available deductions can lead to several negative consequences, such as:
Paying Higher Taxes: If you opt for the new tax regime without calculating whether the lower tax rates outweigh the deductions you could claim under the old regime, you might end up paying higher taxes. This is especially true for individuals who have significant investments in tax-saving instruments like PPF, NPS, and insurance premiums. These taxpayers would be better off choosing the old tax regime, which offers them the chance to reduce their taxable income through deductions.
Missing Out on Tax Savings: If you miss the latest updates on tax regimes or deductions, you may unintentionally forfeit tax-saving opportunities. For example, if you don’t check whether the government has reintroduced a deduction or exemption for a particular investment or expense, you might miss out on valuable opportunities to reduce your tax burden.
Revised Tax Slabs: Changes to tax slabs, even under the same tax regime, can affect your overall tax liability. These revisions may provide opportunities for lower taxes, but ignoring these changes could result in paying more than necessary. For instance, the budget announcements may include a reduction in tax rates for certain income brackets, which could lead to significant savings for taxpayers in those brackets.
The Importance of Staying Updated
Tax laws are constantly evolving, and it is essential to stay informed about the latest changes to make the right decisions when filing your ITR. Taxpayers should be aware of:
New exemptions and deductions that are introduced in the annual budget.
Modifications to existing exemptions or deductions (e.g., changes to the limit of tax-saving instruments like PPF or NPS).
Revised tax slabs or tax rates for both the old and new regimes.
Eligibility criteria for various exemptions and deductions, as they may change based on income level, age, or profession.
How to Avoid Ignoring Key Tax Changes
Consulting Tax Professionals: If you’re unsure about the changes in the tax laws or how they apply to your specific situation, consulting a tax professional or advisor can help. They will be able to guide you on the most effective strategies to minimize your tax liability, whether it involves switching tax regimes or optimizing your deductions.
Using Tax Filing Platforms like TaxBuddy: Using an AI-driven tax filing platform like TaxBuddy ensures that you are always updated with the latest tax changes. These platforms integrate the newest regulations directly into their systems, automatically calculating your best option between the old and new tax regimes and suggesting the most beneficial tax-saving strategies for your profile.
Regularly Reviewing Tax Laws: Tax laws are updated annually, especially after the union budget is presented. Reviewing these changes annually or keeping track of the updates on the Income Tax Department’s official portal or trusted financial news outlets can help ensure you don’t miss important deadlines or opportunities.
Delay in Filing or Revising Returns
Filing your ITR on time is essential to avoid penalties and interest on unpaid taxes. The deadline for filing ITR is set by the government, and failing to meet it can lead to a penalty and interest charges under sections 234A, 234B, and 234C. Additionally, if you make errors in your initial filing, you can revise your return, but the revision must be done before the end of the assessment year. Delays in filing or revising returns can cause unnecessary stress, financial penalties, and delays in processing any refunds.
Conclusion
The ITR filing process is an essential part of tax compliance, but it's also easy to make mistakes that can lead to delays, penalties, and legal complications. By understanding the common errors that can occur during the filing process—such as choosing the wrong ITR form, failing to verify bank details, or not cross-checking Form 26AS—you can avoid costly mistakes and ensure a smooth filing experience. It's important to stay updated on the latest tax regime changes, report all income accurately, and file your returns on time to avoid unnecessary complications. Proper planning and attention to detail will help ensure that your ITR is filed correctly, and any refunds are processed efficiently.
For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1: What should I do if I chose the wrong ITR form?
If you realize that you've selected the wrong ITR form, you can file a revised return with the correct form before the end of the assessment year. It’s essential to ensure that the form you choose corresponds to your income sources, such as salary, business income, or capital gains. Filing the wrong form may cause discrepancies, leading to delays or penalties. The Income Tax Department allows taxpayers to revise their return to rectify such mistakes, provided the revised return is filed within the stipulated timeline.
Q2: How can I verify my bank account details for ITR filing?
Before filing your ITR, it’s crucial to verify the bank account details you provide. Ensure that your bank account number, IFSC code, and other details match those on your bank statements. Any mismatch in the account information could delay your refund or cause processing errors. It’s also a good idea to cross-check these details from your bank’s online portal or passbook before submitting your ITR.
Q3: How do I know if my income reporting is accurate?
To ensure the accuracy of your income reporting, review all documents that reflect your income sources, including salary slips, business income statements, and investment earnings. Cross-check your TDS certificates, Form 16, and other documents against the reported amounts. Any discrepancies in income reporting can lead to delays in refund processing or, in some cases, the issuance of notices by the Income Tax Department. Using platforms like TaxBuddy helps streamline this process by guiding you through income verification and reporting.
Q4: Why should I cross-check Form 26AS and AIS before filing my ITR?
Form 26AS and the Annual Information Statement (AIS) are critical documents that provide a detailed overview of your income and tax payments. Cross-checking these documents ensures that all your TDS payments, income, and tax details are accurately reported. Any mismatch between the information in your ITR and these forms can result in discrepancies, delaying the processing of your return. It’s important to ensure that both forms are complete and accurate before filing to avoid penalties and unnecessary delays.
Q5: How do I choose the right tax regime for my ITR filing?
Choosing the correct tax regime depends on your income, deductions, and exemptions. The new tax regime offers lower tax rates but without exemptions, while the old tax regime allows for various exemptions and deductions but has higher tax rates. To determine which regime works best for you, consider your overall financial situation and tax-saving opportunities. Platforms like TaxBuddy provide tools that help you compare both tax regimes and choose the one that maximizes your tax savings.
Q6: What are the penalties for missing the ITR filing deadline?
If you miss the ITR filing deadline, you will be liable to pay penalties under sections 234A, 234B, and 234C. These penalties are calculated based on the amount of unpaid taxes and the delay in filing. Additionally, interest will be charged on any outstanding tax liabilities. It's crucial to file your ITR on time to avoid such penalties and ensure a smooth tax filing process. Filing a belated return may also result in delays in receiving your refund.
Q7: Can I file my ITR after the deadline?
Yes, you can file a belated return after the deadline, but it will incur penalties and interest charges. The belated return must be filed before December 31 of the assessment year. It’s important to remember that although you can still file late, it’s always better to file on time to avoid additional charges and complications with your tax return.
Q8: How do I include my bank account details in the ITR?
When filing your ITR, you will be required to enter your bank account details, including the account number and IFSC code. These details are necessary for the Income Tax Department to process your refund through direct bank transfer. Double-check that the bank account information you provide matches the details on your bank statements to ensure there are no issues with the transfer. Accurate bank details also reduce the chances of delays in receiving your tax refund.
Q9: What should I do if I find errors in my ITR after filing?
If you identify errors in your ITR after submission, you can file a revised return. The revised return allows you to correct any mistakes made in the original filing, such as incorrect income reporting, missing deductions, or other discrepancies. You can file a revised return before the end of the assessment year. This process helps ensure that your tax records are accurate and reduces the risk of penalties or audits.
Q10: Can I claim deductions if I file my ITR late?
Yes, you can still claim deductions if you file your ITR late, as long as you file the return before the end of the assessment year. However, filing after the deadline may result in penalties, and your refund processing could be delayed. It’s important to ensure that all deductions and exemptions are claimed properly to minimize your tax liability and take full advantage of available tax benefits.
Q11: How can I avoid mistakes when filing my ITR?
To avoid mistakes when filing your ITR, carefully verify all your details, including personal information, income sources, and deductions. Ensure that you select the correct ITR form based on your income type. Double-check your bank account details and verify your TDS credits using Form 26AS and AIS. Using platforms like TaxBuddy can help simplify the process and reduce the risk of errors, as they provide guidance throughout the filing process.
Q12: Do I need to provide any documents when opening a bank account for tax filing?
If you are opening a new bank account for tax purposes, especially if you’re expecting foreign income or have multiple accounts, you may be required to submit documents such as proof of address, identity, and PAN card details. These documents ensure that your bank details are accurately recorded and available for direct tax refunds. Ensuring your bank details are correctly provided in your ITR is important for avoiding delays in refund processing.
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