ITR-6 for Companies: Common Errors That Lead to Audit Flags
- Rashmita Choudhary
- Jul 16
- 9 min read
Filing an accurate Income Tax Return (ITR) is a crucial responsibility for taxpayers, especially businesses, as even minor errors or omissions can lead to significant penalties, interest, or delayed refunds. While taxpayers have access to various tools and resources to ensure a smooth filing process, there are several common mistakes that can affect the accuracy of ITR filings. Understanding these mistakes and how to avoid them is vital for staying compliant with tax regulations and ensuring timely processing of refunds. Let us discuss some of the most common issues businesses and individuals face while filing their ITR, including misreporting of turnover, incorrect expense classification, failure to file tax audit reports, and more. By addressing these areas proactively, taxpayers can minimize the chances of errors and avoid unnecessary complications during the filing process.
Table of Contents:
Misreporting or Mismatch of Turnover
One of the most common mistakes in ITR filing is misreporting or mismatching turnover. For businesses, the turnover figure is crucial as it determines the eligibility for tax audits, the application of certain tax provisions, and the tax rate applicable. Misreporting turnover, whether by over-reporting or under-reporting, can lead to serious consequences. For example, if turnover is understated, the tax liabilities could be lower, but this could attract scrutiny from the tax department, resulting in fines or penalties. Similarly, over-reporting turnover might lead to unnecessary taxes being paid. It is essential to accurately report the turnover, ensuring it matches with the financial statements and other relevant documents. Using proper accounting software and reconciling turnover with annual financial statements can help avoid discrepancies.
Inaccurate Expense Classification
Inaccurate classification of expenses is another common mistake when filing an ITR. Businesses often have various expenses related to operations, salaries, marketing, and others. However, misclassifying these expenses—such as wrongly categorizing capital expenditures as operational expenses—can lead to incorrect tax deductions. This can either result in higher tax liabilities or the risk of the tax department rejecting the claim. For instance, capital expenditures are not deductible in the same way as operational expenses, so ensuring that expenses are correctly classified is essential for accurate tax filing. To avoid this mistake, businesses should maintain detailed records, follow proper accounting standards, and ensure all receipts and invoices are categorized correctly.
Another significant issue businesses face is the delay or non-filing of the tax audit report (Form 3CA/3CD). For businesses whose turnover exceeds the prescribed threshold, filing a tax audit report is mandatory. The audit report is a critical document for the tax authorities to verify the financial statements and assess the correct tax liability. Failure to submit the tax audit report within the specified deadline can lead to penalties and increased scrutiny. In some cases, non-filing of the report may result in the rejection of the ITR. Therefore, businesses should ensure that the tax audit is completed on time and the necessary forms are submitted to the Income Tax Department promptly.
Not Reconciling 26AS, AIS, and TIS with ITR
A common mistake during ITR filing is failing to reconcile the information from Form 26AS, AIS (Annual Information Statement), and TIS (Tax Information Statement) with the ITR. Form 26AS provides a summary of the taxes deducted or collected on behalf of the taxpayer, while the AIS and TIS offer details of various financial transactions reported by third parties. Discrepancies between these statements and the ITR can result in the rejection of the return or delay in refund processing. Taxpayers should thoroughly review and cross-check the information from these statements to ensure accuracy before filing their return. Any discrepancies should be resolved by contacting the relevant parties, such as the employer or financial institution, to ensure that the details in the ITR match the information in these forms.
Non-Compliance with TDS Provisions
Non-compliance with Tax Deducted at Source (TDS) provisions is another mistake that can lead to penalties and delays in ITR processing. TDS is a method of tax collection where the payer deducts tax before making payments to the payee, such as salaries, rent, or professional fees. Failure to correctly deduct or report TDS can result in mismatches between the income reported by the taxpayer and the TDS reported by the deductor. It is essential to ensure that TDS has been properly deducted, reflected in Form 26AS, and reported accurately in the ITR. Not adhering to TDS provisions can lead to significant penalties and interest charges on unpaid taxes.
Not Reporting All Bank Accounts
Another common mistake is not reporting all bank accounts during the ITR filing. The Income Tax Department requires taxpayers to disclose all their bank accounts, including savings, current, and foreign accounts, whether or not there has been any transaction. Failing to report a bank account or concealing income in any unreported accounts can result in penalties and legal consequences. It is essential for individuals and businesses to disclose all their accounts accurately and ensure that the interest income and transactions are included in the ITR.
Not E-Verifying the ITR
Failing to e-verify the ITR after submission is a common oversight. Once the ITR is filed, taxpayers must verify it electronically using methods like OTP (One-Time Password) sent to their registered mobile number or Aadhaar-based verification. If the return is not verified within the prescribed time frame, it will be considered invalid. This can delay the processing of the return and the issuance of refunds. E-verification is an essential step to complete the filing process, and taxpayers must ensure they perform this step after filing their ITR.
Not Opting for the Correct Tax Regime
Choosing the correct tax regime is crucial for taxpayers to ensure that they are availing the maximum benefits and minimizing their tax liability. In the recent past, the Indian government introduced a new tax regime with reduced tax rates but without exemptions and deductions available under the old regime. Many taxpayers make the mistake of selecting the wrong regime or failing to properly evaluate which regime is more beneficial based on their income and deductions. Businesses and individuals should carefully assess their tax situation before choosing the appropriate tax regime and consult tax professionals if needed to ensure the correct option is selected.
Not Maintaining Proper Books of Accounts
Maintaining proper books of accounts is essential for accurate ITR filing, especially for businesses. Businesses must keep comprehensive records of all their financial transactions, including receipts, invoices, bank statements, and ledgers. Inaccurate or incomplete records can lead to misreporting of income and expenses, which can attract penalties, scrutiny, and delays in refunds. Properly maintained books of accounts also provide clarity and transparency, which is crucial for tax audits and assessments. Businesses should invest in accounting software or seek professional help to maintain accurate records.
Not Reporting Capital Gains, Losses, or Other Income
Another common mistake is not reporting all sources of income, including capital gains and losses. Taxpayers must report all their income accurately in the ITR, whether it is from salary, business profits, capital gains, rental income, or other sources. Failing to report income from capital gains or incorrectly reporting losses can lead to penalties and delays in the tax return process. Additionally, taxpayers may miss out on exemptions or tax deductions available for certain types of income, so it is essential to disclose all income sources and claim the appropriate deductions.
Conclusion:
Filing ITR-6 for companies requires careful attention to detail to avoid errors that could lead to audit flags. TaxBuddy offers comprehensive support for businesses, including automatic checks for common filing errors and reminders for essential submissions. 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, providing flexibility to cater to different needs and preferences. The self-filing option is ideal for those who are comfortable navigating the tax filing process on their own, using TaxBuddy’s user-friendly interface and AI-powered tools. On the other hand, the expert-assisted plan provides professional assistance to ensure that your return is filed accurately, particularly for more complex tax situations. Whether you need full control or expert guidance, TaxBuddy accommodates both approaches to suit your preferences.
Q2: Which is the best site to file ITR? TaxBuddy is one of the best platforms for filing your ITR, offering an intuitive, seamless process for both self-filing and expert-assisted options. The platform ensures that your tax returns are filed accurately and efficiently, with minimal stress. While the official Income Tax Department portal is also a reliable option, TaxBuddy provides additional features such as easy-to-use tools, real-time support, and expert assistance to ensure complete compliance. If you're looking for a hassle-free filing experience, TaxBuddy is an excellent choice.
Q3: Where to file an income tax return? You can file your ITR directly on the official Income Tax Department portal atincometax.gov.in or use an efficient filing platform like TaxBuddy. While the official portal is functional, TaxBuddy simplifies the process by offering a more user-friendly interface, real-time support, and the option for expert-assisted filing. It ensures that you don't miss any steps and helps you file your return with ease, offering guidance through the process.
Q4: What is the due date for filing ITR-6 for companies requiring an audit? The due date for filing ITR-6, which is for companies that require an audit under Section 44AB of the Income Tax Act, is typically 31st October of the assessment year. However, the due date may be extended based on specific notifications issued by the CBDT or due to unforeseen circumstances like system updates or revisions in tax laws. Taxpayers should stay informed through official announcements for any extensions or changes to the filing deadline.
Q5: Can I file ITR-6 without uploading the tax audit report? No, the tax audit report is mandatory for filing ITR-6 for companies that are required to undergo an audit. The report must be uploaded along with the ITR-6 form before submission. This report includes detailed information about the company’s financial statements, compliance with tax regulations, and other relevant data, which is essential for the proper assessment of the return. Failure to upload the audit report will lead to rejection or delays in processing the return.
Q6: What happens if I miss reporting a bank account in ITR-6? Failing to report a bank account in ITR-6 may lead to delays in processing your refund, attract scrutiny from the tax authorities, and result in penalties for non-disclosure. The Income Tax Department requires complete and accurate information, including all bank accounts held by the taxpayer, to avoid discrepancies and ensure proper reconciliation of income. Missing this crucial information can trigger an investigation, so it is essential to ensure that all bank accounts are listed in the return to prevent issues.
Q7: How do I reconcile my ITR with Form 26AS and AIS? To reconcile your ITR with Form 26AS and AIS, ensure that the income and TDS amounts reported in your return match exactly with the details available in these forms. Form 26AS reflects the TDS deductions made by your employer or other entities, while the AIS (Annual Information Statement) contains information about all your financial transactions, such as income, deductions, and taxes. Any discrepancies between these forms and your ITR should be corrected before filing to avoid issues like mismatches or tax notices.
Q8: Does TaxBuddy help with GST-ITR reconciliation and audit report filing? Yes, TaxBuddy offers tools for seamless reconciliation of GST data with your ITR filings. This includes ensuring that the GST payments and returns are accurately reflected in your income tax return. Additionally, TaxBuddy simplifies the process of filing audit reports by providing easy upload options and ensuring that all necessary documentation is included. This helps businesses comply with both GST and income tax regulations without any discrepancies, ensuring smoother processing and fewer chances of audit flags.
Q9: What if my ITR is flagged for an audit? If your ITR is flagged for audit, it means that the Income Tax Department has selected your return for further examination due to discrepancies or the need for additional validation. In such cases, it's important to address any discrepancies quickly. You can resolve the issue by providing the requested documents, correcting any mistakes in your original filing, or filing a revised return if necessary. Platforms like TaxBuddy provide support and guidance to ensure your filing is compliant, reducing the chances of audit-related complications.
Q10: How does not e-verifying my ITR affect my filing? If you do not e-verify your ITR after filing, it will not be considered filed by the Income Tax Department. The failure to complete the e-verification process means your return will remain incomplete, leading to penalties, a delay in processing, and the inability to carry forward any losses. E-verification is crucial for the successful submission of your ITR. You can e-verify your ITR using methods like Aadhaar OTP, EVC (Electronic Verification Code), or by sending a signed ITR-V form to the department.
Q11: What are the common penalties for ITR filing mistakes? Common penalties for ITR filing mistakes include late filing fees (under Section 234F), interest on unpaid taxes (under Sections 234A, 234B, and 234C), and additional scrutiny or penalties for underreported income. If the tax authorities find discrepancies or mistakes in your filing, you may also face penalties for non-compliance. To avoid penalties, it's important to file your return on time, report income accurately, and ensure that all required documents are included.
Q12: How can TaxBuddy reduce my risk of audit flags? TaxBuddy minimizes your risk of audit flags by ensuring your return is filed with the utmost accuracy and compliance with tax laws. The platform checks for common mistakes, ensures all required information is included, and helps avoid discrepancies in income reporting, deductions, and TDS. Additionally, TaxBuddy’s expert-assisted filing options provide professional support to ensure that your tax return is filed correctly and that all legal requirements are met, significantly reducing the chances of triggering an audit.
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