ITR Filing 2025: Avoid These Costly Mistakes While Submitting Your Income Tax Return

As the deadline for filing income tax returns (ITR) for Assessment Year (AY) 2025–26 approaches, taxpayers must exercise caution to avoid common and costly errors that could lead to penalties, delayed refunds, or scrutiny from the Income Tax Department. With the filing window open and major changes introduced in Budget 2024, accuracy and diligence are more important than ever.

Here’s a comprehensive article to help you file your ITR correctly and avoid unnecessary complications.

1. Filing the Wrong ITR Form

Choosing the correct ITR form is crucial and depends on your income sources, residential status, and financial activities. For example:

• ITR-1 or ITR-4 may be used by individuals with salary income and capital gains up to Rs. 1.25 lakh under Section 112A, provided there are no carry-forward losses.
• If you have business income, multiple properties, or foreign assets, you may need to use ITR-2 or ITR-3.

Consequence: Filing the wrong form can lead to a “defective return notice” under Section 139(9), requiring correction and possible penalties.

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2. Missing the Filing Deadline

The last date to file ITR for individuals not subject to tax audit is July 31, 2025. Missing this deadline can result in:

• A late filing fee of up to Rs. 10,000 under Section 234F.
• Loss of carry-forward of business or capital losses.
• Interest liability under Sections 234A and 234B.

If the delay extends beyond the grace period, taxpayers also lose the right to revise returns or claim certain exemptions.

3. Incomplete Income Declaration

Many taxpayers forget to report all sources of income, such as:

• Savings account interest exceeding Rs. 10,000 (taxable under Section 80TTA).
• Fixed deposit interest, recurring deposits, and NSC interest.
• Capital gains from mutual fund switches or shares.
• Rental income or income from previous employers.

Important: Even exempt income like dividends, agricultural income, or maturity proceeds from life insurance must be reported for transparency.

4. Overlooking AIS and Form 26AS

Two critical documents must be reviewed before filing:

• Form 26AS: Shows TDS, advance tax, and self-assessment tax paid.
• Annual Information Statement (AIS): Captures your financial transactions like stock sales, interest income, dividends, and high-value purchases.

Mismatch consequences: Discrepancies between your return and these forms can lead to refund delays, notices, or reassessment.

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5. Not Verifying the ITR

Once the return is submitted, it must be verified within 30 days. This can be done using:

• Aadhaar OTP,
• Net banking, or
• By posting the ITR-V to the CPC in Bangalore.

If unverified, the ITR is considered invalid, and the entire process must be redone, possibly with penalties for late filing.

6. Ignoring Budget 2024 Changes

Taxpayers must stay updated with the Finance Act, 2024 changes. Notable updates include:

• New thresholds for HRA, capital gains inclusion under ITR-1.
• Revised reporting formats for capital gains and deductions.
• Enhanced disclosures for foreign income or assets (especially under ITR-2 and ITR-3).

Filing based on old rules could make your return inaccurate and lead to compliance issues.

7. Other Critical Mistakes to Avoid

• Failing to Report Previous Employer's Income

If you switched jobs, include income from all employers. Use Form 16 Part A from each to consolidate.

• Incorrect HRA Declaration

Make sure your rent receipts, landlord’s PAN (if rent >Rs. 1 lakh/year), and your lease agreement are accurate. Misreporting can lead to rejection of the HRA claim.

• Not Clubbing Minor Child’s Income

If your child earns interest or other income, it must be clubbed with your income, with an exemption of Rs. 1,500 per child.

• Submitting Fake Invoices or Bogus Deductions

Claiming false deductions under Section 80C (like fake LIC or tuition bills) or inflated HRA bills can lead to penalties and scrutiny. Tax authorities can verify this through bank transactions or vendor audits.

• Not Paying Advance Tax

If you have rental income or capital gains where TDS is insufficient, you must pay advance tax quarterly. Failure attracts interest under Section 234B and 234C.

• Incorrect Personal or Bank Details

Small errors in IFSC codes, bank account numbers, or unlinked PAN-Aadhaar can delay refunds or invalidate filings.

Practical Tips for Error-Free ITR Filing

• Organize documents early: Salary slips, Form 16, interest certificates, rent receipts, investment proofs, etc.
• Use pre-filled data from the Income Tax portal, but cross-check for errors.
• Use Form 10E for relief on salary arrears and Form 67 for foreign tax credits if applicable.
• Maintain records for at least 7 years, especially if claiming large deductions or foreign income relief.

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What’s New in This Year

The ITR forms for AY 2025–26 come with multiple updates aimed at improving transparency and tax compliance:

• Enhanced HRA disclosures are now mandatory, ensuring more accurate deduction claims.
• ITR-1 now accommodates long-term capital gains under Section 112A up to ₹1.25 lakh.
• Structural changes in capital gains schedules have been made, aligning with amendments introduced in the Finance Act, 2024.

These changes were formally notified by the CBDT, including Notification No. 40/2025 specific to ITR-1.

The Central Board of Direct Taxes (CBDT) extended the ITR filing deadline for non-audit cases from July 31 to September 15, 2025. Happy Filing!

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