ITR Filing 2025: Avoid These Mistakes

Filing Income Tax Returns (ITR) is a significant responsibility for taxpayers in India. With the financial year 2024-25 ending, it’s important to start preparing for filing your ITR for the assessment year 2025-26. The ITR process, although relatively simple, often includes several common pitfalls that can lead to complications, penalties, or missed opportunities for taxpayers. To help you navigate through the process efficiently, here's a well-researched guide highlighting key mistakes to avoid when filing your ITR in 2025.

1. Incorrect Selection of ITR Form

One of the most common errors made by taxpayers is selecting the wrong ITR form. The Income Tax Department provides various ITR forms based on the type of income and category of the taxpayer. It’s essential to choose the correct form, as filing with an incorrect form can lead to rejection or delays in processing your return.

• ITR-1 (Sahaj): For individuals earning income from salary, pension, or other sources like interest, and whose total income is less than ₹50 lakhs.
• ITR-2: For individuals and Hindu Undivided Families (HUFs) who have income from sources other than business or profession.
• ITR-3: For individuals and HUFs having income from business or profession.
• ITR-4 (Sugam): For individuals, HUFs, and firms (other than LLP) who have income from business or profession under the presumptive taxation scheme.

Tip: Always verify your sources of income before selecting the form. Incorrect selection can delay your ITR filing and attract penalties.

2. Missing the Deadline

The last date to file your ITR for the assessment year 2025-26 will likely be July 31, 2025. Failing to file within the deadline can attract penalties. The government imposes a penalty of up to ₹5,000 for delayed filing under Section 234F. Additionally, filing late means you lose out on claiming certain deductions and benefits like carry-forward of losses.

Tip: Plan ahead and file your ITR well before the deadline to avoid any last-minute rush. If you miss the deadline, ensure to file as soon as possible, but bear in mind the penalty.

3. Not Reporting All Sources of Income

Taxpayers sometimes fail to report all their income, intentionally or accidentally. Whether it's freelance income, interest from savings accounts, rental income, or gains from investments, each source of income should be disclosed.

Failure to report income can lead to a notice from the Income Tax Department and may result in penalties or legal consequences. Even if your income from a certain source is below the taxable threshold, you must disclose it.

Tip: Carefully review all your income sources, including interest earned from bank accounts, dividends from mutual funds, and income from any freelance or part-time work.

4. Failing to Claim Deductions

India’s tax laws offer a range of deductions under sections such as 80C, 80D, 80G, and others. Taxpayers often overlook or forget to claim these deductions, which leads to a higher tax liability. Common deductions include:

• Section 80C: Deduction for investments in LIC, PPF, EPF, National Savings Certificates (NSC), etc. (Up to ₹1.5 lakh).
• Section 80D: Deduction for premiums paid on health insurance for self, family, and parents.
• Section 80G: Deduction for donations to charitable institutions.

Tip: Review your financial documents for any eligible deductions. If you have made investments or donations that qualify for tax deductions, ensure they are reflected in your ITR.

5. Not Verifying Your Income and TDS

It is crucial to verify your income details and the Tax Deducted at Source (TDS) that has been deducted by your employer or other parties. Many taxpayers forget to cross-check their Form 16 (provided by the employer) or Form 26AS (which shows TDS deducted on various incomes like salary, interest, and others).

If the TDS details do not match, it can lead to discrepancies in your return, causing it to be rejected or delayed.

Tip: Always verify your Form 16 or Form 26AS and ensure the TDS deducted is accurately reflected in your ITR.

6. Incorrect Bank Details

The Income Tax Department processes refunds via Direct Bank Transfer (DBT). Incorrect bank account details can cause delays or even rejection of the refund.

Tip: Double-check your bank account number, IFSC code, and other details when filling in your ITR form.

7. Not Reporting Foreign Income or Assets

Taxpayers residing in India but earning income abroad or having foreign assets (bank accounts, property, investments, etc.) are required to disclose these under the Foreign Income and Assets section. Failure to report such information could result in a penalty or prosecution under the Black Money Act.

Tip: If you have foreign assets or income, ensure you fully disclose them and comply with the tax laws regarding foreign assets.

8. Ignoring the Capital Gains Tax

Capital gains arising from the sale of assets like property, stocks, or bonds must be reported in your ITR. The tax treatment of capital gains depends on the holding period of the asset—short-term or long-term—and the applicable exemptions under sections like 54 (for long-term capital gains from property).

Tip: If you have sold any property or investments during the year, calculate the capital gains accurately and report them in your ITR. Be sure to check if you’re eligible for any exemptions or deductions.

9. Overlooking the Tax Audit Requirement

If your income exceeds certain limits from business or profession, you are required to get a tax audit done. For FY 2024-25, if your business turnover exceeds ₹1 crore (₹2 crore for professionals), a tax audit is mandatory.

Failing to get a tax audit when required can result in a hefty penalty.

Tip: If your business turnover crosses the prescribed limits, ensure you get the audit done and file your returns accordingly.

10. Misreporting of Losses

If you have suffered losses (for example, from capital gains or business income), you may be entitled to carry forward these losses to offset future taxable income. However, losses need to be reported in the correct manner in your ITR form.

Tip: Ensure that you file your ITR within the prescribed time to carry forward losses. Late filing could result in the inability to carry forward these losses to the next financial year.

11. Not E-Verify Your Return

After filing your ITR, you need to verify it. Failing to do so will render your return invalid. The Income Tax Department offers various methods for e-verification, including OTP, Aadhaar, or net banking.

Tip: Always verify your ITR as soon as it’s filed. This can be done using the Income Tax e-filing portal.

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