Every year, over 5 crore people file their income tax returns. In this blog, we are going to discuss some of the most common mistakes people make while filing their ITRs and strategies to avoid them.
Albert Einstein once famously said that “the hardest thing in the world to understand is income taxes.” If a man of his genius finds it difficult to understand income tax, what chance do you and I have? It’s helpful to learn more about how it all works and what mistakes people generally make so you can avoid making the same mistakes. Always a good thing to learn from others’ mistakes. So after you have read this blog, you’ll know what mistakes to avoid.
The most common mistake many people make is not filing their income tax return on time or not filing it at all. They think that because TDS has already been deducted from their salary, they don’t have any more liabilities to pay taxes or file a return. After all, who wants to shell out another Rs. 500 to their tax adviser when they can just as well do without it?
That right there is a mistake. Even if your employer has deducted tax on your salary and there are no pending liabilities, you still need to file a return, and you need to do it before the due date of filing a return. If you fail to file a return, you could not only attract hefty interest, but also penalties. And on top of that, you could risk getting a notice from the Income Tax Officer, even if years later. They’ll accuse you of concealment of income and levy interest and penalties. And they might not even consider the TDS that has already been deducted by your employer, so you only end up paying more than you would pay if you file an ITR on time.
What are the updated due dates for you to file your income tax returns for financial year 2020-2021? The due date for filing your return this year is September 30, 2021. If this is further pushed, we will update this blog with the changes.
The second most common mistake people make while filing their income tax return is selecting the wrong ITR form. How do you decide which form is applicable to you?
Each year, the Income Tax Department revises the forms and comes up with new guidelines regarding applicability of the forms. Changes in your income will also warrant a change in which form you use. You can’t just look at which form your friend is using and then go ahead and use the same form for yourself. You’ll need to do your due research and, only then, proceed.
The third most common mistake people make when filing their ITR is not updating the correct information about their bank accounts for income tax refunds. When you file your income tax return, you need to update all the bank accounts you hold, whether single or jointly, and all the accounts you have opened or closed during the year.
Next, you need to select a primary bank account where the name on your bank account matches with the name on your PAN card. So, for example, if your last name changed after marriage, you cannot use a bank account that uses your old last name. If you do, you might not receive the income tax refund in your account. Don’t make this mistake. The next thing you need to do is to link your profile with the right mobile number and your primary bank account (this should not be a joint account or an account with a cooperative or foreign bank) where you want to receive your income tax refund.