Top 5 Tax Mistakes People Make and How to Avoid Them

Indian taxpayers have an essential financial duty to file income tax returns (ITR).  Many people and companies make mistakes that can lead to fines, extra scrutiny, or even legal problems, even though they know how important it is.  For a smooth and legal tax filing process, it’s essential to understand these typical mistakes and explain how to avoid them.  The Indian tax system has five common mistakes that people make when they file their taxes. Here are some tips on how to avoid them.

1.      What to Do If You Pick the Wrong ITR Form 

Picking the wrong ITR form is one of the worst mistakes people can make.  It was announced by the Central Board of Direct Taxes (CBDT) that there are seven different ITR forms for different types of users and incomes.  Section 139(9) of the Income Tax Act says that if you use the wrong form, your return could be marked as invalid or faulty, which could cause processing delays or even be rejected.

Tips to Avoid the Mistake:

Find your sources of income:  List your sources of income, like pay, business income, Income from Capital Gains, or rental income.

Match with the Right ITR Form:

• ITR-1 (Sahaj): For people who get money from pay, one house, and other sources (like interest, etc.).
• ITR-2 is for people who have income from more than one house, cash gains, or income from outside the United States.
• ITR-3 is for people who make money from their job or profession.
• For guessed income from a business or trade, use ITR-4 (Sugam).

Seek Help from a Tax Expert: If you’re not sure which form to use based on your salary, talk to a chartered accountant or tax advisor.

2.      Wrong Personal Information

Giving wrong or out-of-date information about yourself, like your name, address, PAN (Permanent Account Number), Aadhaar number, email address, or bank account, can cause returns to be denied or delays.  It is very important to make sure that all of your personal information fits what is on your PAN and other important documents.

Tips to Avoid the Mistake:

• Check your PAN and Aadhaar:  Check that your PAN and Aadhaar are linked and correct.
• Change your address and phone number:  Check that your current address, email address, and cell phone number are all entered properly.
• Double-check your Bank Information: To avoid delays in getting your refund, make sure that your bank account name and IFSC code are correct.

3.      Failure to Report All Sources of Income

If you don’t report all of your income, like interest income, rental income, freelance income, or investment income, you might not be reporting all of your income correctly, which could get you in trouble with the tax officials.  To follow tax rules, you have to report all of your pay, no matter how much it is.

Tips to Avoid the Mistake:

• Gather all of your proof of income:  Get copies of bank interest records, rental agreements, freelance invoices, and investment returns.
• Report All Income: You must include all of your income in your ITR, even if it is not taxed, like income from salary farming that is more than ₹5,000.
• Check your pay against Form 26AS to make sure that all TDS and TCS are taken into account.

4.       Not Claiming Tax Breaks and Deductions That Are Eligible

A lot of people don’t claim all the deductions and breaks they are entitled to, which can lower their tax bill.  Sections 80C (for example, contributions to the Provident Fund), 80D (for example, health insurance premiums), and 80G (for example, gifts to charities) are all common tax breaks.

Tips to Avoid the Mistake:

• Look over the available deductions:  Learn about the deductions and exclusions that apply to the sources of your income.
• Keep Supporting Documents: For deductions you claim, like home loan interest certificates or medical bills, keep the papers and certificates that back them up.
• Talk to a Tax Advisor: If you’re not sure which deductions are available, talk to a tax expert to get the most out of your savings.

5.       Late Filing or Non-Filing of ITR

If you don’t file your ITR by the due date or at all, you could face fines and other legal issues.  It is very important to know when the dates are for filing and make sure you send in your ITR on time.

Tips to Avoid the Mistake:

• Remember when deadlines are:  Bear in mind that the due date for filing ITR is usually in July or September every year.
• Plan ahead: Get all the papers you need ahead of time to avoid having to rush at the last minute.
• E-File Your Return: You can use the Income Tax Department’s e-filing site to send in your return online and make sure it’s correct within the time limit.

Conclusion

To make sure you follow Indian tax rules and have a smooth tax filing experience, you must avoid making common tax filing mistakes.  Taxpayers can lower their chances of getting fined and being closely looked over by using the right ITR form, giving true personal information, listing all sources of income, claiming all allowable deductions, and filing on time.  If you’re not sure about any part of the filing process, talking to a tax expert can help you and give you peace of mind.