Introduction

Filing taxes can be a daunting task, and even a small mistake can lead to penalties, missed deductions, or unnecessary tax liabilities. Whether you are a salaried employee, a freelancer, or a business owner, avoiding common tax filing mistakes can help you save money and stay compliant with tax laws. In this DIY Guide, we will explore the most frequent tax filing mistakes and provide practical tips to ensure an error-free filing experience.

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1. Missing the Tax Filing Deadline

Mistake:

One of the most common mistakes taxpayers make is failing to file their tax returns on time. Missing the deadline can result in penalties and interest charges on outstanding taxes.

How to Avoid It:

• Mark important dates: Keep track of the income tax filing deadlines, which typically fall on July 31 for individuals in India.
• File early: Don’t wait until the last minute to file your returns. Filing early helps avoid last-minute errors and server issues on tax portals.
• Use reminders: Set up calendar alerts or reminders on your phone for key tax deadlines.

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2. Choosing the Wrong Tax Regime

Mistake:

The new tax regime (introduced in Budget 2020) offers lower tax rates but does not allow many deductions. Taxpayers often pick the wrong regime, resulting in higher tax outgo.

How to Avoid It:

• Compare both regimes before filing. Use an online tax calculator to determine which regime is more beneficial.
• If you have multiple deductions (HRA, 80C, 80D, home loan interest, etc.), the old tax regime may be better.
• If you don’t claim many deductions, the new tax regime may save you money.

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3. Not Reporting All Sources of Income

Mistake:

Failing to report all sources of income (e.g., interest from fixed deposits, rental income, capital gains, freelance earnings) can result in tax notices or penalties.

How to Avoid It:

• Check your Form 26AS and Annual Information Statement (AIS) on the Income Tax portal to verify all reported incomes.
• Ensure you include interest from savings accounts, dividend income, or side gigs in your tax return.
• Freelancers should report income correctly and consider deducting expenses related to their work.

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4. Incorrectly Claiming Deductions & Exemptions

Mistake:

Taxpayers often claim ineligible deductions or fail to claim available deductions, leading to errors or financial loss.

How to Avoid It:

• Ensure you claim deductions under Section 80C, 80D, and 80E correctly.
• Verify HRA (House Rent Allowance) claims by maintaining rent receipts and a rental agreement.
• Use an employer-provided Form 16 to check eligible deductions.
• Maintain investment proofs for PPF, ELSS, Life Insurance, EPF, and tuition fees.

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5. Entering Incorrect Bank Details

Mistake:

Providing incorrect bank account details can lead to delayed or failed refunds.

How to Avoid It:

• Double-check your IFSC code and account number before submission.
• Ensure the account is active and in your name.
• Link your PAN with your bank account for smooth tax refunds.

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6. Forgetting to Verify ITR after Filing

Mistake:

Many taxpayers assume filing the return is enough, but failing to e-verify can render the return invalid.

How to Avoid It:

• After filing, verify your ITR within 30 days via Aadhaar OTP, net banking, or by sending a signed physical copy to CPC Bangalore.
• Unverified returns are treated as “not filed”, so don’t forget this step.

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7. Ignoring Advance Tax Payment (For Freelancers & Businesses)

Mistake:

Freelancers and business owners often fail to pay advance tax, leading to interest under Sections 234B and 234C.

How to Avoid It:

• If your total tax liability exceeds ₹10,000 per year, pay advance tax in four installments (June 15, Sept 15, Dec 15, and March 15).
• Use the challan ITNS 280 to make online payments.

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8. Not Keeping Proper Tax Documents

Mistake:

Failure to maintain tax records can cause problems during assessments or audits.

How to Avoid It:

• Keep salary slips, Form 16, rent receipts, investment proofs, and capital gains statements for at least 6 years.
• Maintain GST records if you run a business.

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9. Claiming False Deductions

Mistake:

Some taxpayers inflate deductions or claim fake expenses to reduce taxable income, which can lead to penalties if caught.

How to Avoid It:

• Always claim legitimate expenses and deductions.
• Ensure you have valid bills, receipts, and proof of investments.
• Avoid claiming fake rent receipts; the IT department may request lease agreements or payment proofs.

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10. Incorrectly Filing Tax Returns (Wrong ITR Form)

Mistake:

Using the wrong Income Tax Return (ITR) form can lead to rejection or additional tax liability.

How to Avoid It:

• Salaried employees should file ITR-1 (if no capital gains or business income).
• Freelancers and business owners should file ITR-3 or ITR-4.
• Use the Income Tax portal’s “Help Me Choose” tool to select the correct form.

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Conclusion

Filing taxes correctly is crucial to avoid penalties, maximize refunds, and stay compliant with tax laws. By avoiding these common tax filing mistakes, you can save money, reduce stress, and prevent unnecessary legal trouble. If unsure, consider using an income tax expert or a CA to review your filing.