Income Tax: Avoid these 4 common mistakes that taxpayers make while filing ITR

Income Tax: With only 45 days left to meet the September 15 deadline to file income tax return (ITR) for FY2024-25, taxpayers are busy sourcing the correct information and documents required to file their return well on time.

It is worth mentioning that the income tax department on July 30 released the online utility for ITR-3 whereas ITR-2 was enabled on July 17, to be filed through online mode with prefilled data. The Excel utilities for these forms were released early last month.

When filing the income tax return, salaried taxpayers do not have to do much, other than arrange Form 16 (issued by the employer) and an interest certificate (issued by the bank).

However, if you have multiple sources of income, including from house property, capital gains, self-employment, or other sources, it is recommended that you seek the professional advice of a chartered accountant or an income tax expert.

But if you are a DIY person, then you can definitely give it (ITR filing) a go, but make sure that you do not commit any of the oft-repeated mistakes.

Here, we list some of the common mistakes that taxpayers make.

Filing ITR: Common mistakes to avoid

I. Choosing the right tax regime: First and foremost, taxpayers must choose the right tax regime, which leads to lower tax outgo. One can even use an income tax calculator on the income tax website to compare the tax component under both regimes.

“Many taxpayers either default to the new regime without analysis or continue with the old regime out of habit. This oversight often leads to incorrect tax computation, avoidable excess tax payments, or mismatches during return processing by the Income Tax Department. In the last one or two assessment years, a growing trend has been observed among individual taxpayers—especially salaried employees—of failing to evaluate which income tax regime is more beneficial for them,” says Dinkar Sharma, Partner, Jotwani Associates.

II. Not reporting gains from trading: Another mistake to avoid is not reporting capital gains earned from trading in securities.

“Several salaried taxpayers with investments in shares and mutual funds also forget to incorporate capital gains earned from trading or redemptions. This typically happens when the taxpayer has passive investments and does not actively track transactions. However, with the introduction of the Annual Information Statement (AIS), such gains are now more easily detected by the tax department, and non-disclosure can trigger automated notices,” explains Dinkar Sharma of Jotwani Associates.

III. Failure to e-verify the return: Another important thing to remember is to e-verify the return. Taxpayers must make sure that they do not skip e-verification.

“One of the most common mistakes which taxpayers tend to make is to skip the e-verification. If it is not done on time, the return gets invalidated after 30 days. Last year, we met a few taxpayers who made this mistake and were later had to pay extra tax since the previous return got invalidated. And the new return – once the deadline expires — can be filed under the new tax regime only, rendering their claimed exemptions invalidated,” says Chirag Chauhan, a Mumbai-based chartered accountant.

IV. Failure to claim exemption: At times, taxpayers earn capital gains and reinvest some of the gains but forget claiming the exemption.

“It is not uncommon among taxpayers to fail to claim exemptions under relevant sections such as 54, 54EC, or 54F. These exemptions are available when capital gains are reinvested in residential property or certain specified bonds. However, failure to reinvest within prescribed timelines, or to follow the procedural conditions, can result in denial of exemption and an inflated tax bill,” adds Dinkar Sharma of Jotwani Associates.

Should the deadline be further extended?

CA Chirag Chauhan believes that the current deadline (September 15) is very near, and it will help if the Central Board of Direct Taxes (CBDT) extends it.

“Effectively, only one and a half months are remaining before the deadline ends on September 15. And with the kind of information that is required to be submitted under the old tax regime, this time period is not sufficient. Only two days ago, the tax department released ITR-3 for online filing. Given all this, I think that the deadline should be further extended to October 30,” adds Chauhan.

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