Mistakes to avoid while filing your tax return!

It’s that time of the year. The time when CA offices are filled with chaos and zillions of papers. When people rush to get their forms and bank statements to file ITR. When #delayitrfilling trends on Twitter every day. Yes, it's the tax season. 

With all the last-minute chaos and hassle people tend to make a lot of mistakes while filling out taxes. These mistakes can sometimes cost you lakhs of rupees, so read on to find out the most common mistakes that people make while filing taxes and save yourself from the losses.

Mistake 1: Not filling taxes on time

Well, if you are procrastinating filing your taxes, and hoping Nimala Tai would extend the deadline, then better be ready for some penalties. Because recently the government stated that they won’t be extending the deadlines as 46% of the people have paid taxes. Also, you shouldn’t really take a chance on filing late taxes as they involve some hefty penalties such as

1.  A late filing penalty fees which can be up to Rs.5,000.
2. Interest on the tax amount: If an individual or business fails to pay their income tax return on time, they will be charged 1% per month until they file their ITRs.
3. You cannot carry forward your losses: If an ITR is not filed by the due date, the taxpayer will be unable to carry forward any loss under the headings of 'profits and gains of business or profession' or 'capital gains.'

Mistake 2: Choosing the wrong ITR form

To simplify tax filing for people, the tax department has categorised taxpayers into different groups based on their income source and other factors. All different groups have to fill out different forms. Many people tend to make mistakes while choosing the correct ITR form for themselves. The selection of an ITR form depends basically on your income source. Say, you are a salaried person, having an income of up to 50 lakhs then you need to fill out ITR form 1.

But in case you have capital gains from your investments and get income from more than one house property then you would have to file ITR2.

In case, if you have income from F&O and intraday, then you have to file ITR3.

So, choosing the right ITR form is a bit tricky but crucial if you don’t want your application to get rejected. 

Mistake 3: Ignoring form 26AS and not matching it with AIS

In 2021, the Income Tax Department launched the new Annual Information Statement (AIS) on the Compliance Portal, which provides a comprehensive view of the financial transactions carried out during a fiscal year to taxpayers. The system generates information based on your PAN and Aadhar card.

The AIS includes information about interest, dividends, securities transactions, mutual fund transactions, foreign remittances, etc. Before the introduction of AIS, the majority of the information was available on the taxpayer's Form 26AS (also known as the tax passbook). Form 26AS is a statement that details the taxes that were deducted, collected, and paid during the fiscal year.It includes information such as, details of tax deducted at source and of the deductors, details of advance tax, details of self-assessment tax, Tax refunds, details of Annual Information Report (AIR), and high-value transactions.

While filing ITR make sure that the details in both of these forms do match, in case it doesn’t then the portal gives you a feedback option, wherein you can put the details of those transactions.

Mistake 4: Quoting wrong personal information

While filling the lengthy tax forms, investors tend to make small mistakes like entering the wrong PAN number or mobile number.

On the surface, these mistakes may seem harmless, but they can result in some serious consequences like wrong PAN number can result in rejection of your form, or may result in penalties or tax audit.

Similarly, if you have provided the wrong bank details or did not validate your bank details, and in case you are eligible for a tax refund, the department not process your refund.

You should always pre-validate your bank account when filing your income tax returns. It is crucial if you are eligible for a tax refund for any overpayment of taxes. To pre-validate your account you have to link your PAN to your bank account.

The IT Department will be unable to credit your income tax refund if you have not prevalidated your bank account. This is due to the fact that all tax refunds are currently credited directly to your bank account.

So, while filling your taxes make that extra effort to cross-check your personal information.

Mistake 5: Not Sending ITR-V to CPC

The majority of taxpayers must file their income tax returns electronically. However, simply submitting the return electronically is insufficient; you must also verify the return for your identity to be validated. This can be accomplished by mailing the ITR-V to the CPC in Bangalore or by using one of the available e-verification methods.

In case you cannot e-verify your ITR online, then you have to send a physical copy of ITR-V to CPC Banglore. Taxpayers can verify their ITR within 120 days, after uploading it. Post that the ITR would be invalid. Therefore, always verify your ITR.

Mistake 6: Not disclosing income from all sources

Due to AIS, most of your income is reported and therefore you should also disclose income from all your sources. 

An individual can have multiple sources of income like income from investments, house property, dividends, and the sale of a property. It is prudent that you disclose all of your income sources if any discrepancy is found then you could face a penalty or your ITR could be rejected.

Mistake 7: Not disclosing Capital gains and losses

Often taxpayers don’t report capital gains and losses while filing their taxes. With the new AIS in place, most of our transactions are recorded and hence people should always disclose their capital gains.

Now mostly when people have capital losses, they tend not to report it but it is not the correct thing to do as reporting your losses could save up a lot of your taxes. So, in case if you have capital losses, then you can set off these losses against your capital gains in the coming years and can save up your money on capital gains tax.

Mistake 8: Choosing the wrong assessment year

On most occasions, people are confused between the assessment year and the financial year. So let me break it up for you.The financial year is the year in which you have earned the income, say you are filing your 

The Income Tax Department (I-T) in India taxes your earnings once a year for a year. In India, this one-year period begins on April 1 and ends on March 31 of the following year. This time period, the year in which you earned the income, is referred to as the "financial year" or "fiscal year." So you'll be filing ITR for 2021-22, and the deadline is July 31, 2022. (unless extended by the government).

Now an assessment year is the time period in which your prior year's income is assessed for ITR filing purposes. An assessment year begins on April 1 and ends on March 31 of the following year. So your assessment year would AY2022-23.

Well, these were some common mistakes that taxpayers make. The due date is close so make sure you file your taxes on time and don’t make any of these mistakes.