Income Tax Filing 2025: Common Mistakes To Avoid Before March 31

Ending yet again on 31 July 2023, the time for income tax filing for FY 2022-23 (AY 2023-24) is nearing. And in anxious excitement, plenty of ending-hour tax filers are burdened with imperfect returns, which trigger an automatic rejection, impose penalties, or worse still, can place the taxpaying entity under prosecution.

If one has a good grasp of the regulations and guidance levels of this law, it is very easy to file an income tax return and fill it in without any error, while the chances of income tax mistakes stand high if one isn’t aware of all the sections and various other deductions and provisions.

Regarding the above aspect, we have compiled a list of common errors continuously committed in income tax filing. Our complete guidelines shall ensure that to file returns correctly in your best interest towards getting a tax refund.

Common Mistakes To Avoid While Filing ITR

1. Using the Incorrect ITR Form

Selecting the correct income tax filing form is crucial. Every taxpayer must use the appropriate ITR form based on their income sources. Filing using an incorrect form can result in the return being classified as “defective” or even invalid. The income tax calculator can help determine the correct form based on your earnings. Platforms like Tax2win automatically select the applicable ITR form, ensuring a hassle-free experience.

2. Providing Incorrect Personal Details

Taxpayers should be careful when entering details such as PAN, Aadhaar, and correspondence address. The Income Tax Department sends notices to the address mentioned in the previous ITR, so any mistakes may lead to communication gaps. It is also essential to provide the correct email ID and phone number since e-verification reminders and tax refund intimations are sent through these channels.

3. Entering Incorrect Bank Details

Many income tax refunds are delayed due to incorrect bank account details. Taxpayers should ensure their name, account number, and IFSC code are accurately mentioned in the return. Since all tax refunds are directly credited to the bank account, any mistake can lead to unnecessary delays. Additionally, taxpayers must report all their active bank accounts, as per the latest rules.

4. Not Reporting Interest Income

Many taxpayers overlook interest earned from savings accounts, fixed deposits (FDs), and recurring deposits, which must be declared under “Income from Other Sources.” Savings account interest exceeding Rs. 10,000 annually is taxable, and deductions can be claimed under Section 80TTA (Rs. 50,000 for senior citizens under Section 80TTB). Taxpayers often assume that FD interest is taxable only upon maturity, but it must be reported annually.

5. Not Declaring Income from Previous Jobs

In any case of changing jobs during the financial year, he is required to report all incomes, including those from the previous employer. Any inconsistencies in incomes reported and Form 26AS might initiate complexities that may bring about tax notices. New Form 16 has this facility to contain details of incomes from all your employers.

6. Ignoring Form 26AS Reconciliation

Form 26AS maintains a record of tax deducted at source (TDS) and tax collection at source (TCS). Any inconsistency, if at all, between the details given in Form 26AS and the ITR would invite questions from the tax department. It is advisable for taxpayers to cross-verify all income particulars with this statement before submitting their return.

7. Not Checking Bank Statements

Taxpayers should review their bank statements to account for all taxable and tax-exempt incomes, including gifts received, interest credited, and other earnings. Income tax filing requires disclosure of all operational bank accounts, making accurate income reporting essential.

8. Failing to Declare Exempt Income

Even though some incomes, such as agricultural income and certain dividends, are tax-exempt, they must still be reported in the ITR. Failing to do so can invite scrutiny from the tax department.

9. Not Reporting Interest on Tax Refunds

Interest earned on income tax refunds is taxable and should be reported under “Income from Other Sources.” This information is available in Form 26AS.

10. Failing to E-Verify the Return

Filing an ITR is incomplete without verification. Taxpayers must verify their returns within 30 days via Aadhaar OTP, net banking, or by sending a physical copy to CPC Bangalore. An unverified return is considered “invalid,” leading to penalties and additional tax liabilities.

11. Not Clubbing Incomes

Under the income tax filing rules, certain incomes, such as those earned by a minor child or spouse, must be clubbed with the taxpayer’s income. For example, interest earned from an FD in a minor child’s name must be reported by the parent.

12. Late Filing of Returns

Delaying income tax filing results in penalties disallows carry-forward of losses, and delays refunds. A delay may also attract interest on outstanding tax liabilities.

13. Not Maintaining Evidence for Deductions

All deductions claimed under Chapter VI-A (e.g., LIC, tuition fees, PPF, and medical insurance) must be supported by valid documentation. Failure to produce proof during scrutiny may result in disallowance of deductions and increased tax liability.

14. Misreporting Multiple House Properties

A taxpayer can declare only two properties as self-occupied. Any additional properties, even if unoccupied, are deemed to be let out and taxed accordingly.

15. Non-Filing of Returns Despite Holding Foreign Assets

Individuals holding foreign assets, including bank accounts, must file ITR, even if their income is below the taxable threshold. Not disclosing such assets may lead to penalties and notices from the tax department.

16. Not Paying Advance or Self-Assessment Tax

TDS may not always cover the entire tax liability, particularly for those in the 30% tax bracket. Taxpayers earning rental income or significant interest income must calculate and pay advance tax. The income tax calculator can help assess tax liabilities and prevent interest penalties.

17. Not Reporting Capital Gains on Mutual Fund Switches

Switching between mutual fund schemes is considered a taxable event, even though transactions do not reflect in bank statements. Taxpayers should report any capital gains earned through such switches.

18. Submitting Fake Invoices

Some individuals submit fake LIC receipts, rent receipts, or exaggerated medical bills to claim higher deductions. The tax department cross-verifies these claims, and fraudulent deductions can result in penalties.

19. Not Linking PAN with Bank Accounts

Linking PAN with bank accounts ensures seamless income tax refunds. Additionally, bank account validation on the income tax portal is necessary for refund processing.

20. Failing to Submit Requisite Forms

Certain exemptions require additional forms. For example, Form 10E must be filed for salary arrears relief under Section 89(1). Similarly, taxpayers claiming foreign tax relief must submit Form 67.

21. Incorrect Determination of Residential Status

Residential status impacts the scope of taxable income. Resident taxpayers are taxed on global income, while non-residents are taxed only on Indian earnings. Incorrectly determining residential status may lead to inaccurate tax filings.

22. Incorrect Deduction Claims

Certain donations qualify for 100% deductions, while others allow only 50%. Taxpayers should ensure correct deduction claims to avoid tax department scrutiny.

Why Accuracy Matters in Income Tax Filing

A small mistake in income tax filing can lead to penalties, defective returns, or legal consequences. Using the right income tax calculator and cross-verifying details with Form 26AS can help taxpayers file accurate returns. Ensuring compliance with tax regulations prevents unnecessary complications and ensures smooth refund processing.