Income Tax Filing: 5 Costly Errors You Must Avoid

With the Income Tax Department adopting robust AI analytics and comprehensive data sharing, tax filings have become highly scrutinized. The department now auto-correlates transactions from your banks, credit cards, property registers, and mutual fund houses.

Even minor, unintentional omissions in your Income Tax Return (ITR) can trigger compliance notices, penalties, or unnecessary audit scrutiny. Here are the 5 most common tax filing mistakes and how you can prevent them.

1. Mismatch Between Form 26AS, AIS, and ITR

The Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) compile all financial transactions tied to your PAN.

The Mismatch Risk: If you report a different interest income or capital gain value in your ITR than what is captured in your AIS or Form 26AS, the tax processing system will automatically flag the return, resulting in a defective return notice under Section 139(9).
Prevention: Always download and meticulously cross-examine your AIS, TIS, and Form 26AS before preparing your ITR draft.

2. Omitting Details of Multiple Bank Accounts

Tax laws mandate that you declare all active bank accounts held in India at any point during the financial year.

Many taxpayers only provide the bank details of their primary salary or savings account where they expect their tax refund.
You must report details of all accounts, including joint accounts, dormant accounts, or accounts closed during the year. Only minor, completely inactive accounts are exempted, but it is safest to list all accounts.

3. Failure to Disclose Foreign Assets & Income

If you qualify as a Resident and Ordinarily Resident (ROR) in India, you must declare global assets.

Important Warning: Under the Black Money Act, failure to disclose foreign assets (including foreign bank accounts, shares of foreign companies like US stocks, global mutual funds, or foreign properties) carries a flat penalty of ₹10 Lakhs and potential prosecution, regardless of whether you have tax liability on those assets.

Make sure to fill out the Schedule FA (Foreign Assets) in your ITR form accurately if you own fractional shares of US tech giants or have ESOPs from global employers.

4. Selecting the Wrong ITR Form

Filing a return using the incorrect ITR form renders the entire filing null and void (defective return).

ITR-1 (Sahaj): For salaried individuals with one house property and income under ₹50 Lakhs. Cannot be used by directors of companies, holders of unlisted shares, or individuals with capital gains.
ITR-2: For individuals earning salary/pension, capital gains, or foreign income, but no business profits.
ITR-3 / ITR-4: Designed specifically for business owners, partners in firms, and freelance professionals.

5. Not Verifying the Filed ITR (e-Verification)

Filing your ITR is only the first step. Your return is not treated as valid until it is verified.

You must e-verify your ITR using Aadhaar OTP, Net Banking, or EVC within 30 days of filing.
If you fail to verify within this timeline, your return is treated as “Invalid” (Never Filed), leading to late filing fees, interest on unpaid taxes, and loss of eligibility to carry forward business losses.

Secure Your Peace of Mind

Filing taxes accurately requires professional review, especially if you have diversified investments, business income, or foreign assets.

Our Direct Tax Advisory desk at NGRK & Associates LLP conducts rigorous tax audits and ensures error-free filing. For compliance peace of mind, reach out to us at info@ngrk.in or call our direct helpline.