5 Common Mistakes That Trigger Notices (And How TaxBuddy Prevents Them)
- Rashmita Choudhary
- Aug 28
- 10 min read
Filing Income Tax Returns (ITR) is an essential process for every taxpayer, but it comes with certain risks if not done correctly. Taxpayers often make common mistakes while filing ITR that can lead to notices from the Income Tax Department. These mistakes may result in penalties, delayed refunds, or even legal consequences. Let us understand some of the most common errors made during ITR filing, such as mismatches in income details, failure to disclose multiple income sources, incorrect deductions, and more. We will also discuss how platforms like TaxBuddy help minimize these mistakes by guiding users through the filing process.
Table of Contents:
Mismatch in Income Details (Form 16 vs. Form 26AS/ AIS)
One of the most common errors taxpayers make is the mismatch between the income reported in theirForm 16 and the information available in Form 26AS or the Annual Information Statement (AIS). Form 16 is issued by employers, detailing the income earned and the tax deducted at source (TDS). However,Form 26AS, which is an annual statement of all tax-related transactions, may contain discrepancies if TDS was deducted but not deposited correctly, or if other income details like interest from banks or dividends are missing.
When the Income Tax Department compares the information in your ITR with Form 26AS, any discrepancies may trigger a notice for clarification or revision. To avoid this, ensure that the income and TDS details match across all forms before filing. Platforms like TaxBuddy help identify and resolve these mismatches by cross-checking Form 16 and Form 26AS details during the filing process, ensuring smooth and accurate submissions.
Non-Disclosure of Multiple Income Sources (Interest, Rental, Capital Gains)
Another frequent issue is the non-disclosure of income from sources such as interest, rental income, or capital gains. Many taxpayers fail to report income from these sources, especially when they are below the taxable threshold or not included in Form 16. However, the Income Tax Department has access to detailed information through bank accounts and other sources, making it easier to detect discrepancies in income reporting.
Failing to disclose such income can lead tonotices and penalties. It's crucial to include all sources of income, even those not reported in Form 16, in your tax return. TaxBuddy’s platform prompts users to include such income and helps ensure nothing is left out.
Claiming Incorrect or Excess Deductions
Taxpayers often make the mistake of claiming incorrect or excess deductions, which can be due to a lack of understanding of what is eligible for deduction under various sections of the Income Tax Act. Common deductions such as those under Section 80C, 80D, 80G, and 80E are frequently misused or over-claimed, leading to discrepancies in the return.
While it’s important to optimize tax-saving opportunities, claiming deductions beyond what is allowable can attract scrutiny from the tax department.TaxBuddyhelps users by automatically identifying eligible deductions and providing suggestions to avoid errors. It also helps users understand the various tax-saving instruments that can be used without risking over-claims.
Ignoring High-Value Transactions and SFT Reporting
Taxpayers often overlook reporting high-value transactions such as large cash deposits, purchases of immovable property, or investments in securities. The Income Tax Department monitors certain high-value transactions and expects taxpayers to report them in their tax returns under theStatement of Financial Transactions (SFT). Failure to report these transactions can raise red flags and lead to notices.
It is essential to disclose all significant transactions and investments in the appropriate section of the ITR to avoid unnecessary complications. TaxBuddy’s system prompts users to enter all relevant high-value transactions, ensuring compliance with SFT reporting requirements.
Delay or Errors in Filing (Missing Deadlines or Wrong ITR Form)
Filing your Income Tax Return (ITR) is a crucial step for complying with tax regulations, and failing to do so correctly can lead to unwanted consequences. Missing the filing deadline or using the wrong ITR form are two of the most common mistakes that trigger notices from the Income Tax Department. These errors can cause delays in processing your return, penalties, and additional interest charges. Let's explore both issues in detail and how to avoid them.
Missing the Filing Deadline
The deadline for filing ITR is strictly enforced, and missing it can have significant implications. The Income Tax Department has clear deadlines for filing returns, and once these deadlines pass, taxpayers may be subject to penalties, interest, and delayed refunds.
When you fail to file your ITR within the prescribed deadline, you may still be allowed to file a belated return. However, this is only possible within a specific period (usually until December 31 of the assessment year), and it comes with penalties. The penalties for late filing can be as high as ₹5,000 underSection 234F of the Income Tax Act, depending on the delay. In addition to the penalties, taxpayers will also face interest on any unpaid tax under Sections 234A, 234B, and 234C, which further increases the total amount owed.
Furthermore, filing late can delay the processing of your refund. The Income Tax Department processes returns on a first-come, first-served basis, so those who file on time generally receive their refunds sooner. Late filings may be processed later, and taxpayers may experience delays in receiving their refunds, which can have financial implications for those relying on them.
Selecting the Wrong ITR Form
Using the wrong ITR form is another common mistake that taxpayers make, which can result in the rejection of their return or flagging for revision. The ITR forms vary depending on the type of taxpayer—whether they are salaried employees, self-employed, business owners, or have income from other sources. Each type of income requires specific information, and using the wrong form can create discrepancies in the filing process.
For example:
ITR-1 (Sahaj) is for individuals with income from salary, pension, or income from one house property. If someone with business income files ITR-1, their return may be rejected.
ITR-2 is for individuals and Hindu Undivided Families (HUFs) who earn income from sources other than a business or profession, such as capital gains, foreign income, etc.
ITR-3 is meant for individuals and HUFs who have income from business or profession.
Filing the wrong ITR form may lead to delays in processing, and if not corrected, the return may be flagged for revision. This can lead to further complications, such as unnecessary scrutiny or penalties.
How to Prevent These Mistakes
Understand Your Income Profile: Make sure you are familiar with the different types of income you have. Whether you are salaried, self-employed, or a business owner, knowing your income sources will help you choose the right ITR form.
Select the Correct ITR Form: Always select the appropriate form that corresponds to your income sources. For example, if you are a salaried employee with no other income sources, ITR-1 is the correct form. However, if you have business income or capital gains, you may need ITR-2 or ITR-3.
Use Tools and Guidance: Platforms like TaxBuddy simplify this process by automatically suggesting the appropriate ITR form based on your income profile. TaxBuddy uses AI-driven technology to analyze your income details and recommend the best form, ensuring that you don’t select the wrong one.
File Before the Deadline: Avoid penalties and interest by ensuring you file your return on time. TaxBuddy also helps by sending reminders about upcoming deadlines and guiding you through the filing process to make sure you meet the deadline without rushing.
TaxBuddy’s Role in Simplifying the Filing Process
TaxBuddy takes the complexity out of filing your ITR. The platform automatically suggests the correct ITR form based on the information you input, minimizing the risk of selecting the wrong form. Additionally, it provides an easy-to-use interface and sends timely reminders, helping you stay on track with filing deadlines.
By using TaxBuddy, you can ensure that your return is filed accurately and on time, avoiding the pitfalls of missing the deadline or using the wrong ITR form. The AI-powered platform also helps you maximize your deductions and ensures compliance with tax laws, providing a seamless and stress-free tax filing experience.
In conclusion, understanding the right ITR form and adhering to the filing deadline are critical to a smooth and error-free tax filing process. By using the right tools and staying informed, you can ensure that your return is filed correctly, avoiding penalties, interest charges, and delays in refund processing.
Conclusion
Filing ITR can be a daunting process, but avoiding common mistakes significantly reduces the risk of receiving notices from the Income Tax Department. By ensuring accurate reporting of income, claiming only eligible deductions, and disclosing all necessary transactions, taxpayers can minimize their exposure to penalties or audits. TaxBuddy’s platform helps mitigate these risks by offering a user-friendly interface that guides users through each step of the filing process. It automatically checks for errors, ensures compliance, and helps users stay on top of deadlines, making it an invaluable tool for anyone looking to file their ITR accurately and efficiently. For anyone looking for assistance in tax filing, I highly recommend you download theTaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1: Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options? Yes, TaxBuddy offers both self-filing and expert-assisted plans for ITR filing. If you're comfortable navigating the tax filing process on your own, you can choose the self-filing option, which provides intuitive tools and guidance to complete your ITR. However, if you prefer professional assistance, TaxBuddy's expert-assisted plans provide support from experienced tax professionals, ensuring accurate and compliant filing. This flexibility ensures that you have the choice to select the best plan based on your needs, whether you're a first-time filer or someone with a more complex tax situation.
Q2: Which is the best site to file ITR? The best site for filing your ITR depends on your specific needs and comfort level. The official Income Tax Department portal is a reliable option, but it may not be the most user-friendly, especially for those who are unfamiliar with the filing process. TaxBuddy, on the other hand, provides a comprehensive, user-friendly platform with both self-filing and expert-assisted options. It offers additional features like error-free filing, personalized support, and guidance on tax-saving strategies. For a seamless and guided experience, TaxBuddy is an excellent choice.
Q3: Where to file an income tax return? You can file your ITR on the official Income Tax Department portal at incometax.gov.in or use third-party platforms like TaxBuddy. While the official portal is the government-authorized platform, TaxBuddy provides a more intuitive and supportive experience, with personalized assistance and AI-driven tools to ensure your tax return is accurate and compliant. Using TaxBuddy can help you avoid common mistakes and take advantage of tax-saving opportunities.
Q4: Can I file my ITR after the deadline without penalties? No, filing your ITR after the deadline will incur penalties and interest on any unpaid taxes. If you miss the due date, you can still file a belated return by December 31, 2025, for FY 2024-25 (Assessment Year 2025-26). However, you will be charged a penalty of up to ₹5,000, and interest will accrue under sections 234A, 234B, and 234C. To avoid these extra charges, it’s always best to file before the deadline. Timely filing ensures that your return is processed quickly and your refund (if applicable) is received sooner.
Q5: What happens if I fail to file ITR within the extended deadline? If you fail to file your ITR by the extended deadline of September 15, 2025, for FY 2024-25, you can still file a belated return by December 31, 2025. However, filing late will lead to penalties, including a fine of up to ₹5,000 depending on the delay and the amount of tax due. Additionally, your refund processing will be delayed. Late filing may also result in scrutiny of your return by the tax department, which can further delay processing and resolution.
Q6: How do I check the status of my income tax refund? To check the status of your income tax refund, you can visit the official Income Tax Department’s e-filing portal. You’ll need your PAN (Permanent Account Number), assessment year, and other relevant details. TaxBuddy also allows you to track your refund status through its platform. If you filed your return through TaxBuddy, you can receive updates or support to help you understand your refund status.
Q7: Does TaxBuddy assist with TDS credit verification? Yes, TaxBuddy helps you verify your TDS credits before filing your return. TDS (Tax Deducted at Source) is an important component of your total tax liability, and it must be accurately reflected in your tax return. TaxBuddy checks whether the TDS credited by your employer or any other deductor matches the records in the Income Tax Department’s database. This step ensures that your return is filed correctly and that you don’t face delays in processing your refund due to TDS mismatches.
Q8: How long does it take for TaxBuddy to process an ITR filing? TaxBuddy aims to process most ITR filings swiftly. Simple returns may be processed in a matter of hours, while more complex filings requiring expert assistance may take longer. The time frame depends on the complexity of the return, the documents required, and whether any additional information is needed from the taxpayer. TaxBuddy ensures that all returns are filed accurately and within the stipulated timelines to avoid delays in refund processing.
Q9: What if I file ITR after the extended deadline? If you file after the extended deadline of September 15, 2025, you can still submit a belated return by December 31, 2025. However, this will result in penalties and interest on any unpaid taxes. Filing after the deadline will also delay your refund processing, as belated returns are processed after those filed on time. To avoid unnecessary delays and penalties, it’s best to file as early as possible.
Q10: Are there penalties for errors in my ITR filing? Yes, errors in your ITR filing can lead to penalties, interest on unpaid taxes, and delays in refund processing. Common errors include incorrect income reporting, missing deductions, or mismatches in TDS credits. These errors may trigger scrutiny by the tax authorities, which can delay your refund or result in further fines. TaxBuddy helps ensure your return is error-free, reducing the likelihood of penalties and providing guidance for accurate filing.
Q11: Can I make corrections in my ITR after filing? Yes, if you discover errors in your ITR after filing, you can file a revised return. The revised return can be filed before the end of the assessment year, allowing you to correct mistakes such as incorrect income reporting, missed deductions, or errors in TDS details. Filing a revised return helps ensure your return is accurate and compliant, avoiding penalties and reducing delays in refund processing.
Q12: Does TaxBuddy support all tax regimes for ITR filing? Yes, TaxBuddy supports both the old and new tax regimes for ITR filing. Whether you opt for the old tax regime, which offers various exemptions and deductions, or the new tax regime, which provides a simplified structure with lower tax rates and no exemptions, TaxBuddy helps you navigate the best option based on your financial situation. The platform automatically helps you assess which tax regime offers the most benefit, ensuring you maximize your tax savings while staying compliant with the law.
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