With the deadline for income tax return filing on July 31, scores of people in India will be busy organising their income tax return (ITR) papers in the next few weeks. But taxpayers must consider a few points to avoid future troubles due to incorrect filing or picking the wrong form.

The Income Tax Department may reject your form over factual inconsistencies or for picking the wrong form to file ITR. Generally, the department rejects the form for discrepancies under section 139 (9) of the Income Tax Act and sends a defective return notice to the taxpayer. But you can avoid this and other common mistakes by being a tad more careful. 

Choosing Incorrect ITR Form  

As most individual taxpayers file taxes themselves, they need to be extra careful, starting from selecting the ITR form to the last step of verifying them. For example, if one has income from salary and capital gains from investments, they should use the ITR–2 Form, not ITR–1. A wrong Form selection would require you to re-file the return later. It can also invite queries from the income tax department. So if you are confused about which ITR form you should use, check the income tax portal for information or seek the help of professionals like tax advisors, charted accountants, etc.

Selecting Wrong Assessment Year 

It is the most common mistake taxpayers make. They confuse the assessment year with the financial year. For example, the return filing for the assessment year 2023-24 is July 31, 2023.

It is for the income earned between April 1, 2022, and March 31, 2023, or the financial year 2022-23. The assessment year is the year following the financial year. So a mistake while selecting the assessment year may create confusion and should be avoided.

Interest Income Not Reported 

Interest income from any source must be reported while filing the return. Interest income from a savings account is taxable if it exceeds Rs 10,000. However, senior citizens are exempted up to Rs 50,000, including savings and fixed deposits (FDs). But, even if the interest income does not exceed the limit, it should be reported every year and not when the FD matures. Also, for claiming Tax Deducted at Source (TDS) on FDs in the refund, they must give complete information on the interest income in the ITR form.

Mismatch With Form 26AS & AIS 

Form 26AS gives information about the TDS and TCS deducted during the financial year. So, one should always match this information while filing the tax return, as a mismatch may attract queries from the income tax department. They must report all incomes in addition to Annual Information Statement (AIS) in Form 26AS. AIS contains more information, such as saving account interest, FD interests, dividends, rent received, sale and purchase transactions of properties, foreign remittances, etc.

Abhishek Rana, a chartered accountant at AAAR & Associates, says, “A taxpayer needs to examine the AIS and the tax information summary (TIS) to ensure no financial transactions are missed from reporting.” Remember, one should also verify all details with the bank statement.  

Failure To Report Loss From Property Sale 

If there is any short-term capital gain or loss from selling a property, one should report it in ITR. In failing to do so, the taxpayer cannot carry forward the loss.

Says Rana, “The gain or loss from the transfer of any capital asset should be disclosed in the income tax return. The capital loss, if any, suffered by the assessee is eligible to be carried forward to the next assessment year, provided the ITR is filed within the due date.”

Incorrect Donation Percentage For Claim

Under section 80G of the Income Tax Act, one can claim a deduction on the donations made to eligible charitable institutions. But all donations do not qualify for a 100 per cent deduction, so one needs to be careful while claiming the correct percentage, whether 100 per cent or 50 per cent and claiming the proper share for a deduction.

Forgetting To Verify ITR V 

Sometimes, people forget to verify the details they provided in the return form. The process does not complete after filing the return. It must be verified within 30 days of filing. Otherwise, the department will not process it. The form, once filled, can be verified online through the ‘e-verify’ option on the income tax website with Aadhaar OTP, etc., or the physical copy of ITR V (acknowledgement) can be sent by post to the department’s centralised processing centre in Bangalore. Lastly, the tax return should be filed within the due date to avoid late filing penalties.