Flat Preloader Icon

5 Common Mistakes Taxpayers Make While Filing Their Income Tax Returns


Making errors when filing an income tax return can result in penalties and legal action, rendering the return invalid. For some people, submitting an income tax return might be difficult while being simple for others. However, it is quite common to become perplexed because there are so many clauses, exclusions, sections, and restrictions.

Owing to this, taxpayers are bound to make mistakes. Therefore, we have listed below some of the most common mistakes tax filers make. To prevent similar errors, read the guide.

Failure to E-Verify ITR V

The burden of submitting a tax return extends beyond the ITR filing. Within 120 days after filing, you must validate the return; otherwise, the Income Tax Department won’t process your tax return. ITR V can be verified either offline by mailing the ITR V (Acknowledgement) to CPC Bangalore or electronically using the EVC, Aadhar OTP, or Net banking.

Most individuals fail to do this. Your tax return won’t be regarded as filed if ITR V isn’t verified, and the department will send you a notification that your return is “Invalid.” The income tax authority will assume that you have never filed a return if you don’t E-verify the return within the allotted period.

Failure to account for more than two properties

If a person owns more than two house properties, they can choose which two to include as their primary residences, and the other two will be regarded to be “deemed to be rented out.”

This implies that if a person owns three properties, any one of them will be regarded as taxable even if it is empty for the whole year and does not result in any financial advantages for the taxpayer. The potential for profits by the taxpayer will be taken into account, and tax will be assessed on the yearly value determined in accordance with the legislation.

Non-Disclosure of Certain Income / Loss

Over the past several years, many assesses have started investing / trading in listed equity shares and Futures & Options through various online trading platforms. As there is no withholding of tax done by the trading platforms on these transactions, most of the time, assesses fail to disclose the income earned / loss sustained through these activities. This may result in the issuance of notice by the tax authorities asking the assessed reasons for failure to disclose the same.

Further, where the assessed sustains any loss, it would be pertinent to disclose such loss in the Return, as such loss can be carried forward for set off against future profits.

Understand ‘Residential Status’ and applicable disclosure requirements

In case you are a Non-Resident Indian (NRI), or you have recently moved out of / into India, you would need to check your ‘Tax Residential Status’ before you file your Return of Income, as the taxability of your income would largely depend on the same. Further, disclosure requirements also vary from person to person. For example, an NRI who falls under the ‘Resident and Ordinary Resident’ category would need to disclose his worldwide income in India, even though he / she had paid taxes on such income in another country. However, foreign tax credit may be claimed on such income as per the applicable provisions.

In the event that a person has any assets overseas, even though his income is below the taxable limit, he must nevertheless file an income tax return.

For instance, opening a bank account in the nation where your education was pursued is essential. Many times, when students return to India, they take money out of their overseas bank accounts but don’t close them. The individual would not be able to file ITR 1 if the bank account was still open; instead, he or she would need to utilise ITR 2 and provide all relevant information regarding the account. Any non-disclosure may bring notice from the Income Tax Department.

Not mentioning exempted income. 

A taxpayer is required by law to report all of his income, regardless of whether it is tax-exempt. The baseline exemption level is Rs. 2.5 lakh, and if a taxpayer’s gross income exceeds this amount, they are required to file income tax returns. Although exempt income is not taxed, failing to mention it might result in notifications from the income tax department.

For Instance –

  • According to Section 54 of the Income Tax Act of 1961, capital gains are excluded if you sell your home and utilise the proceeds to buy a new one. But one must accurately declare this transaction in the ITR.
  • Income from a life insurance policy that is exempt from taxes under Section 10(D) or gifts from close family members, such as a parent, sibling, or parent, are excluded. Nevertheless, the IT act requires the disclosure of all of these incomes.

Income tax forms should be filed carefully since even a tiny error can get you into serious difficulties with the Income Tax Department. You could be penalized or served a tax notice. If you are also facing difficulties, Steadfast Business Consulting Tax Services are always there to help you navigate the tax filing journey. You can connect with our tax experts for any tax-related concerns.

Important checkpoints: 

  • Ensure that PAN, e-mail address, and Bank account details are correct
  • Identify the correct return form applicable
  • Study the documents such as

­ Form 16, Form 16A’s, as applicable

­ Bank statement / passbook

­ Interest certificate

­ Investment proofs for which deductions are to be claimed along with books of accounts, B/S, and P&L, if applicable.

  • Ensure to have Receipts of eligible deductions (viz. LIC payments, Mediclaim, donations, etc.)
  • Link PAN with Aadhar
  • Pre validate your bank account in the e-filing portal
  • Ensure Disclosure of all Income Sources and appropriate taxes are paid along with interest, if any
  • If Total Income exceeds INR 50 lakhs, disclose assets & liabilities particulars
  • Taxpayer shall go through Form 26AS, Annual Information Statement (AIS)
  • Check for Self-assessment tax payable if any
  • In case of ambiguity / disclosure in return, obtain an opinion from a tax expert

Frequently Asked Questions

What if I filed the incorrect ITR form?

If someone submits the incorrect ITR form, the return may be deemed faulty, or the ITR may become completely invalid. So, it’s important to select the right ITR form. The ITR may be revised and corrected until 31st December of the relevant Assessment Year. Alternatively, correct this as soon as you get the Income Tax Department’s Notice of Defective Return.

How many times can I revise the return?

The number of times an income tax return may be revised is not limited, provided the Original Return of Income is filed within the due dates. However, the revised Return of Income can be filed before 31st December of the relevant Assessment Year.

I have claimed a refund on my tax return, but the same is not received. What to do?

The tax return is often processed within a few weeks after filing the same. However, in certain circumstances where there are multiple sources of income/deduction claimed, the processing of the return may take time. In such cases, the assesses may raise a grievance with the Centralized Processing Center (CPC) as well as constantly check for status in the e-filing portal for refund failure intimations, if any.





Scroll to Top