ITR filing for FY2022-23: Common mistakes taxpayers should avoid

As the deadline to file income tax returns (ITR) for FY 2022-23, which is July 31, 2023, is nearing, most individual taxpayers are busy filing their tax returns online. The ITR filing process has been made easy through the Income Tax Department’s e-filing portal. However, any mistake when filing tax returns could lead to the taxpayer receiving a notice from the I-T department.

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The ITR forms – ITR-1, ITR-2 and ITR-4, with pre-filled data, are applicable for individuals. Salaried employees receive Form 16 from their employer, which is an essential document required for filing ITRs. Salaried individuals can start filing ITR as soon as they receive Form 16. This will provide them ample time to file their ITR and avoid any errors.

In this article, we share the common mistakes taxpayers must avoid when filing income tax returns.

#1 Choosing the wrong ITR form

Selecting the wrong form will make the ITR form defective and the I-T department may send a notice to file a revised return. Failure to comply with the request may result in one’s tax returns getting considered invalid. Taxpayers are allowed 15 days to rectify the defective return.

A taxpayer must choose an ITR form based on the source of income, total taxable income, origin of income (domestic or foreign), assets, etc. Individual taxpayers must choose forms ITR 1 to ITR 4.

ITR-1 (Sahaj) is applicable for those with a total income of up to Rs 50 lakh received from salary/ pension, house, one house property. It is also applicable if one has income from other sources, including interest from bank/post office fixed deposits, agricultural income of up to Rs 5 lakh, etc.

#2 Not reporting the interest income

Even if one’s salary is the main income source, one needs to ensure that other income sources are also stated in the ITR. Not reporting income from income sources such as business/profession, house property, capital gains and investments, besides income from salary, is a common mistake that one should avoid. An individual’s savings account balance attracts interest and may be taxable. The Annual Information Statement (AIS) provides savings bank account details. Hence, it is important to check with one’s bank account statements, Form 26AS and AIS to determine interest income earned.

#3 Not declaring income from the previous employer

Not declaring income from a previous employer is a mistake salaried individuals must avoid. Those who have switched jobs in FY23 will have multiple Forms 16 issued by their previous and current employers. Such employees must be careful when filing their tax returns and declare income earned from both their employers. The AIS reflects the entire income details. Thus, the data from both Forms 16 will be captured.

#4 Failure to pre-validate bank account or errors in bank details

When filing income tax returns, taxpayers are required to pre-validate the bank account. This is an important step if they are expecting to get a tax refund. If one fails to pre-validate the bank account, the I-T department will not be able to credit the tax refund owed to the taxpayer.

Further, any error in one’s bank details can lead to delays. Taxpayers must declare all their bank accounts held in India. Bank account details such as name of the bank, account number and IFS code would be required.

#5 Errors when reporting capital gains

The way capital gains earned are considered may depend on the income source or asset class. Since the rates and conditions differ, errors in calculating capital gains is quite common among taxpayers. For example, capital gains on the sale of equity shares or equity mutual fund units are taxable at 15% tax if the units or shares are sold within 12 months. If the holding period is longer, the tax rate is 10% for gains over Rs one lakh in the financial year.

Capital gains on the sale of debt fund units are taken as short-term gains if the holding period is shorter than three years, added to one’s total income and taxed according to the relevant slab rate. If it is a longer period, 20% tax with indexation benefits is applicable. Remember that long-term capital gains on debt funds has been removed.

Make sure to disclose income from all sources by checking your bank statements, mutual fund, demat and broking house statements, etc. One can also get professional help from tax experts.

#6 Failure to verify tax returns after filing them

After filing the income tax return, taxpayers are required to verify their returns so that the income tax department can take it up for further processing. One can verify ITR online through the official e-filing portal using their Aadhaar, pre-validated bank account, demat account, etc.

One can also download the ITR-V, or acknowledgement form, from the website and mail it to the income tax department’s central processing centre in Bengaluru through the post.

Failure or delay in the verification may result in a delay in any tax refund. A taxpayer must verify the ITR within 120 days of filing it online. Otherwise, it will be treated as invalid, and the taxpayer will be required to e-file the return, which may be considered a belated return. One should note that filing ITR after the due date will provide only 30 days to complete the verification.

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Harini Balasubramanian

Harini is a content management professional with over 12 years of experience. She has contributed articles for various domains, including real estate, finance, health and travel insurance and e-governance. She has in-depth experience in writing well-researched articles on property trends, infrastructure, taxation, real estate projects and related topics. A Bachelor of Science with Honours in Physics, Harini prefers reading motivational books and keeping abreast of the latest developments in the real estate sector.