The season for filing Income Tax Returns (ITR) in India begins in the months of July and August every year.
There are a number of documents that taxpayers must obtain and verify during this period, such as Form 16, Capital Gains Statements, Form 26AS, Interest Certificates, etc. When rushing to get these key documents together, many of us tend to overlook small details that can derail the entire process of filing an Income Tax Return.
For a smooth ITR filing experience, you need to avoid the following 5 common tax filing mistakes.
1. Filing returns after the due date
Due to the second wave of the COVID pandemic, the deadline has been extended to 30th September 2021. However, if your Income Tax Return is not filed by this date, you will face penalties including:
- Fees of up to Rs. 10,000 may be charged for late filings
- If taxes are not paid, penal interest will be charged at a rate of 1% per month
- A delay in receiving a refund of excess taxes
- Be punctual and make sure that you don’t miss the tax filing deadline in order to avoid these penalties and charges.
2. Non-filing of income tax returns is a mistake
If you fail to file your ITR, the Income Tax Department may launch legal action against you. Missing the deadline for filing returns is bad enough.
There can be quite severe consequences resulting from these legal proceedings, including:
- From the due date until the ITR is filed, penalty interest is calculated on tax dues
- Tax due plus a penalty of 50% of the tax avoided
- A minimum of three years and a maximum of seven years in prison
- If you want to avoid these severe penalties, you must file an ITR and pay your tax dues on time.
3. Using the wrong ITR form is a mistake number
The most common tax filing mistake is using the incorrect ITR form. Using the incorrect form results in a defective filing, which the IRS will reject.
- Based on your income source, you can use the appropriate ITR form. For instance, if you are a salaried individual, you can use ITR Form 1. However, if you are a salaried individual and receive capital gains from investments, you must use ITR Form 2.
- However, if you are self-employed and earn income from your business, you will need to file an ITR Form 3 to report your income.
- When filing your tax returns, selecting the correct ITR form might seem difficult. However, most websites offering ITR filing services have developed methods to ensure that you choose the right form.
4: Providing Incorrect Personal Information
Your income tax returns may contain mistakes when it comes to providing essential personal information. Examples of such errors include:
- A PAN that is incorrect is provided
- Date of birth or email address incorrect
- An incorrect account number or IFSC code has been entered
- If you make these seemingly harmless tax filing mistakes, you can run into a number of problems.
- The tax authorities will reject your ITR if you have given incorrect PAN details. This may result in penalties, interest, and even an audit.
- In the same way, if you provide the wrong bank account information or IFSC code on your ITR, any tax refunds you are entitled to will be delayed.
- Additionally, providing your correct email address and mobile number is crucial, since the Income Tax department often sends out important updates via email and SMS.
- Make sure all your personal information is accurate before submitting your tax return.
5: Selecting The Wrong Assessment Year
- Often, taxpayers confuse “Assessment Year” with “Financial Year”.
- An income is earned during the financial year.
- A return filed on or before 30th September 2021 will cover income earned between 1st April 2020 and 31st March 2021. This period of April to March is referred to as the Financial Year 2020-21 or FY 2020-21.