10 Common Mistakes to Avoid While Filing Your Income Tax Return in India

Filing your Income Tax Return (ITR) is a fundamental financial responsibility for every eligible citizen in India. While the process has become more streamlined, it can still seem daunting, often leading to errors that cause unnecessary stress, attract notices from the Income Tax Department, and result in financial penalties. It’s crucial to understand the most common mistakes filing income tax return to navigate the process smoothly. Even minor oversights, like choosing the wrong form or forgetting to report a small amount of interest income, can have significant consequences, turning a routine task into a complicated ordeal. This guide is designed to help you avoid these pitfalls. We will walk you through the most frequent errors and provide actionable tips to ensure a smooth, accurate, and hassle-free ITR filing experience. Whether you are a salaried individual or a small business owner, this comprehensive guide will address the key mistakes to avoid while filing income tax return India, empowering you to file with confidence.

Mistake #1: Selecting the Incorrect ITR Form

One of the most fundamental yet frequent errors taxpayers make is selecting the wrong ITR form. The Income Tax Department has prescribed different forms for different categories of taxpayers based on their sources of income and total income level. Filing the wrong form will lead to your return being classified as ‘defective’ by the department, requiring you to refile it within a specified timeframe. This not only wastes time but also adds unnecessary complexity to the process. Understanding the purpose of each form is the first step in how to avoid income tax filing mistakes. Each form is tailored to specific financial profiles, and choosing the correct one ensures that you are providing all the necessary information in the required format, leading to a successful and accepted return.

Understanding the Key ITR Forms

To avoid this error, it’s essential to know which form applies to you. Here are the most common ones:

ITR-1 (Sahaj): This is for resident individuals whose total income does not exceed ₹50 lakh. Their income sources must be limited to Salary/Pension, one House Property, and ‘Other Sources’ (like savings account interest, FD interest, etc.).
ITR-2: This form is for Individuals and Hindu Undivided Families (HUFs) who do not have income from profits and gains of a business or profession. It is suitable if you have income from salary, multiple house properties, or capital gains.
ITR-3: This form is for Individuals and HUFs who have income from profits and gains of a business or profession. If you are a freelancer, a consultant, or run your own business as a proprietor, this is likely the form for you.
ITR-4 (Sugam): This is for Individuals, HUFs, and Firms (other than LLPs) who have opted for the presumptive taxation scheme under Sections 44AD, 44ADA, or 44AE of the Income Tax Act, provided their total income is up to ₹50 lakh.

How to Choose the Right Form

Making the right choice is simple if you assess your income sources carefully. Use this table as a quick guide:

If your income includes…	And you are…	Then use…
Salary, One House Property, Other Sources (up to ₹50 Lakh)	A Resident Individual	ITR-1
Capital Gains, Multiple House Properties, Foreign Assets	An Individual/HUF (No Business Income)	ITR-2
Income from a Business or Profession	An Individual/HUF	ITR-3
Business Income under Presumptive Scheme (up to ₹50 Lakh)	An Individual/HUF/Firm (other than LLP)	ITR-4

Actionable Tip: Always double-check the eligibility criteria for each form on the official Income Tax e-filing portal before you begin the filing process. The portal often helps you select the correct form based on your profile.

Mistake #2: Mismatch Between Declared Income and Form 26AS/AIS

The Income Tax Department has become increasingly adept at using technology to track financial transactions. A significant source of information for them is your Form 26AS and Annual Information Statement (AIS). One of the most glaring common errors in income tax filing India is a mismatch between the income you declare in your ITR and the information available in these statements. When the department’s automated systems detect a discrepancy, such as TDS deducted by a client that you forgot to report as income, it automatically triggers a notice. Reconciling these documents is no longer optional; it is a mandatory pre-filing check to ensure accuracy and avoid scrutiny from tax authorities. Ignoring this step can lead to inquiries, demands for additional tax, and penalties.

What are Form 26AS, AIS, and TIS?

Before you can reconcile, you need to understand these critical documents:

Form 26AS: Think of this as your tax passbook. It is an annual consolidated statement that provides details of Tax Deducted at Source (TDS) by your employer, banks, and clients; Tax Collected at Source (TCS) by vendors; Advance Tax you’ve paid; and any Self-Assessment Tax payments.
Annual Information Statement (AIS) & Taxpayer Information Summary (TIS): The AIS is a far more comprehensive statement. It captures a wide range of your financial transactions throughout the year, even those where no tax was deducted. This includes savings bank interest, dividends, sale and purchase of securities and mutual funds, property transactions, and foreign remittances. The TIS is a simplified summary of the AIS.

The Importance of Reconciliation

The data in your AIS and Form 26AS is what the Income Tax Department already knows about your financial activities. Therefore, it’s absolutely crucial that the income details you report in your ITR align perfectly with these statements. For example, if your AIS shows you received ₹15,000 in interest from Fixed Deposits, but you only declare ₹10,000 in your ITR, this mismatch is a red flag. The department’s systems will cross-verify this information, and any inconsistency will likely result in an automated notice asking you to explain the difference.

Actionable Tip: Before you even start filling out your ITR, log in to the e-filing portal and download your latest Form 26AS and AIS. Meticulously review every entry and ensure you have accounted for all reported income and tax credits in your ITR calculations.

Mistake #3: Forgetting to Report All Sources of Income

Forgetting to report all sources of income is one of the most common mistakes salaried employees make in income tax filing. Many people, especially those receiving a regular salary, tend to focus only on their Form 16 and overlook other streams of income. However, under tax law, you are required to report all income you have earned during the financial year, regardless of the amount or whether tax has been deducted on it. This includes seemingly minor amounts like interest from a savings account. Overlooking these can lead to underreporting of income, which can result in interest and penalties if discovered by the tax department during assessment. It’s essential to be thorough and compile information from all your financial accounts and investments.

Income Beyond Your Salary

Salaried individuals often have other income streams that need to be reported. Be sure to include the following:

Interest Income: This is a frequently missed category. You must report interest earned from:
- Savings Bank Accounts
- Fixed Deposits (FDs)
- Recurring Deposits (RDs)
- Post Office Schemes
- Bonds and Debentures
Capital Gains: If you have sold any capital assets during the year, you must report the profit or loss. This includes gains from:
- Sale of stocks or equity mutual funds
- Sale of debt mutual funds
- Sale of property (land, building)
- Sale of gold or other valuable assets
“Income from Other Sources”: This is a catch-all category for income that doesn’t fit elsewhere. Common examples include:
- Rental income from a house property (other than your primary residence).
- Earnings from freelance work, tuitions, or a side-gig.
- Gifts received from non-relatives exceeding ₹50,000 in a year.
- Winnings from lotteries, game shows, or horse races.

Actionable Tip: Create a checklist before filing. Go through all your bank statements, FD certificates, mutual fund statements, and any other investment documents for the financial year. Consolidate all Form 16 (from your employer) and Form 16A (for TDS on non-salary income) to ensure no income stream is accidentally omitted.

Mistake #4: Claiming Incorrect or Incomplete Deductions

Tax deductions are a powerful tool to reduce your overall tax liability, but they are also a common area for errors. Many taxpayers either miss out on deductions they are eligible for or claim incorrect amounts, both of which can be problematic. Not claiming a rightful deduction means you end up paying more tax than necessary. On the other hand, claiming a deduction for which you do not have valid proof or are not eligible can lead to disallowance of the claim and imposition of penalties during tax scrutiny. Providing accurate information and maintaining proper documentation are key income tax filing tips for salaried individuals and business owners alike. To understand these better, review our list of the Top 10 Tax Deductions for Salaried Employees in India.

Common Deduction Errors under Chapter VI-A

Chapter VI-A of the Income Tax Act contains the most popular deductions. Here’s where mistakes often happen:

Section 80C: This is the most well-known section with a limit of ₹1.5 lakh. Common errors include claiming more than the limit or forgetting to claim eligible investments made outside of what was declared to the employer. Remember to include contributions to:
- Employees’ Provident Fund (EPF)
- Public Provident Fund (PPF)
- Life insurance premiums
- Principal repayment on a home loan
- Equity Linked Savings Scheme (ELSS) mutual funds
- Tuition fees for up to two children
Beyond 80C: Many taxpayers stop at 80C, missing out on other valuable deductions:
- Section 80D: For premiums paid on health insurance for self, family, and parents. The limits are different for individuals below 60 years and for senior citizens.
- Section 80G: For donations made to specified charitable institutions. You need the receipt with the institution’s PAN and registration details.
- Section 80TTA: This allows a deduction of up to ₹10,000 on interest earned from savings bank accounts. This is often missed by taxpayers who report the interest income but forget to claim the corresponding deduction.

Maintaining Proof of Investment

It is mandatory to have valid proof for every deduction you claim in your ITR. While you don’t need to submit these documents along with your return, the Income Tax Department can ask for them if your case is selected for scrutiny. Failure to produce the required proofs can lead to the reversal of your claimed deductions and a demand for tax, interest, and penalty. Therefore, keep all receipts, premium payment statements, donation receipts, and investment proofs organized and accessible for at least a few years after filing.

Mistake #5: Not Choosing the Optimal Tax Regime

Since the introduction of the New Tax Regime, taxpayers now have a choice to make, and failing to evaluate which regime is more beneficial is a significant mistake. The decision can have a direct impact on your tax outgo for the year. Many people continue with the default or old regime without running the numbers, potentially paying more tax than they need to. The best choice is not universal; it is highly personal and depends on your income level, salary structure (e.g., HRA component), and your investment and spending habits related to tax-saving instruments. Our detailed guide on the Old vs New Tax Regime: Which is Better for Salaried Individuals in 2025? can help you decide.

Old Regime vs. New Regime: A Quick Overview

Understanding the fundamental difference is key to making an informed choice:

Old Tax Regime: This is the traditional system that allows you to claim a wide range of exemptions and deductions to reduce your taxable income. This includes House Rent Allowance (HRA), Leave Travel Allowance (LTA), and popular deductions under Chapter VI-A like Section 80C, 80D, 80G, etc. This regime is beneficial for those who make full use of these tax-saving avenues.
New Tax Regime: This regime offers lower, more concessional tax slab rates. However, the trade-off is that you must forgo most of the common exemptions and deductions (around 70 of them), including HRA, LTA, and Section 80C. This regime might be more beneficial for individuals with lower investments or those who prefer a simpler tax filing process without the hassle of maintaining investment proofs.

How to Decide

The only way to know for sure is to do the math. You must calculate your total tax liability under both regimes. First, calculate your tax under the old regime by applying all the eligible deductions and exemptions you have. Then, calculate your tax under the new regime with its lower slab rates but without any of the major deductions. Compare the final tax payable in both scenarios and choose the one that results in a lower amount.

Actionable Tip: You don’t have to do this manually. The Income Tax Department provides an official tax calculator on the e-filing portal. You can enter your income and deduction details, and it will show you the tax liability under both regimes, helping you make the most financially sound decision.

Mistake #6: Failing to E-Verify the Return on Time

This is the final, and perhaps most critical, hurdle in the ITR filing process. Many taxpayers assume their job is done once they have submitted the return online. However, simply uploading your ITR is not enough. The process is only considered complete once you have verified it. An unverified return is treated as if it was never filed at all. The Income Tax Department will not process it, which means you will not receive any applicable refunds, and you could be liable for penalties for non-filing.

Why E-Verification is a Crucial Final Step

Verification is your way of confirming that the information submitted in the ITR is true and correct to the best of your knowledge. It is the digital equivalent of signing a physical document. Without this authentication, the department considers the return invalid. The consequences are serious: the return is declared non-est (as if it never existed), and all the effort you put into preparing and filing it goes to waste.

Methods of E-Verification

The department has made the verification process quick and easy through several electronic methods. You can choose any of the following:

Aadhaar OTP: The most popular method. A One-Time Password (OTP) is sent to the mobile number linked with your Aadhaar.
Net Banking: You can log into your net banking portal and access the e-filing website from there to e-verify.
Bank Account EVC: You can pre-validate your bank account on the e-filing portal and generate an Electronic Verification Code (EVC).
Demat Account EVC: Similar to the bank account method, you can use your pre-validated Demat account to generate an EVC.

The 30-Day Deadline

Previously, taxpayers had 120 days to verify their returns. This has now been reduced. You must e-verify your income tax return within 30 days of filing it. This is a strict deadline. If you miss it, your filed ITR will be invalidated. Set a reminder or, better yet, e-verify it immediately after submission to avoid this costly oversight.

Conclusion

Filing your income tax return accurately is a hallmark of a responsible citizen. While the task can seem complex, being aware of the common pitfalls can make the process significantly smoother. By focusing on the fundamentals—choosing the right ITR form, meticulously reconciling your income with Form 26AS and AIS, declaring all your income sources, claiming correct deductions, and finally, e-verifying on time—you can avoid most issues. Being diligent and methodical not only ensures compliance but also saves you from the stress of dealing with tax notices, penalties, and future legal hassles.

Navigating the complexities of tax filing can be challenging. To avoid these common mistakes filing income tax return and ensure complete peace of mind, let the experts at TaxRobo handle it for you. Contact us today for seamless and accurate ITR filing services!

FAQ Section

Q1: What happens if I file my ITR after the due date?

Answer: Filing your ITR after the due date has several consequences. You may have to pay a late filing fee, as detailed in our guide on Section 234F: Penalties for Late Filing of Income Tax Returns, which can be up to ₹5,000. You will also be liable to pay interest under Section 234A on any outstanding tax amount. Furthermore, you will not be able to carry forward certain types of losses (like business loss or capital loss) to future years.

Q2: I made a mistake in my original ITR. Can I correct it?

Answer: Yes, absolutely. The Income Tax Act allows you to correct any omission or wrong statement made in the original return by filing a Revised Return under Section 139(5). You can file a revised return at any time before the end of the relevant assessment year (or before the completion of the assessment, whichever is earlier). There is no limit on the number of times you can revise your return.

Q3: Is it mandatory to report interest earned on my savings account?

Answer: Yes, it is mandatory. Interest earned from a savings bank account, post office account, or cooperative society bank account must be reported under the head “Income from Other Sources.” However, you can claim a deduction of up to ₹10,000 on this interest income under Section 80TTA (for individuals other than senior citizens).

Q4: What should I do if I forget to e-verify my ITR within 30 days?

Answer: If you miss the 30-day window for verification, your return is treated as invalid. However, you can submit a ‘condonation of delay’ request on the e-filing portal. You will need to provide a valid reason for the delay in verification. The approval of this request is at the discretion of the concerned tax authorities. If approved, you can then proceed with the verification.

Q5: Do I need to file an ITR if my total income is below the basic exemption limit?

Answer: Generally, if your gross total income is below the basic exemption limit (e.g., ₹2.5 lakh for individuals below 60 in the old regime), you are not required to file an ITR. However, it is highly advisable to file a ‘Nil Return’. An ITR serves as a crucial proof of income and is often required for loan applications, visa processing, and claiming tax refunds. Filing is also mandatory in certain specific cases, such as if you have foreign assets or have deposited more than ₹1 crore in a bank account during the year, regardless of your income level.

Common Mistakes Filing Income Tax Return? Avoid These!