Tax filing mistakes to avoid this year

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The annual tax filing season can prove to be a nerve-wracking experience for many people. However, tax planning is a critical aspect of financial management, and steering clear of common mistakes is paramount. Between deciphering forms, remembering deductions, and meeting deadlines, it's easy to fall into traps that may lead you to overpaying taxes or even penalties.

  • Table of contents
  1. Incorrect form selection
  2. Procrastination
  3. Deduction blind spots
  4. Investing for taxes only
  5. Overlooking mistakes/a>
  6. Form 26AS and TDS mismatch
  7. Handling Form 16 from multiple employers
  8. Going solo
  9. Paper trail woes
  10. Ignoring technology
  11. Not paying advance tax/ self-assessment tax

Individual taxpayers must file their tax returns by July 31 in the assessment year. Postponing this obligation until the eleventh hour and rushing through the filing process may result in the inadvertent disclosure of inaccurate information, potentially impacting the overall outcome of the return filing. Taxpayers have the option to file returns manually or electronically. Notably, e-filing became mandatory from the financial year 2016-17 onward for individuals with a refund claim or a total income exceeding Rs. 2.5 lakh.
Listed below are several tax planning mistakes to avoid this year while filing tax:

Incorrect form selection

Choosing the correct ITR form is crucial when filing returns. Failure to do so may lead to processing issues with the income tax department. The choice of form depends on the taxpayer's income, nature, and category. If the wrong form is used, a defect notice may be issued, requiring rectification within a specified time. For instance, ITR-1 suits salaried individuals with income below Rs. 50 lakh and no capital gains, while ITR-3 is for those with business or professional income.

Procrastination

The biggest mistake most people make is putting off tax planning until the last minute. This often leads to rushed decisions, missed deductions, and scrambling to gather documents. Therefore, always start early! Whether it's January or June, set aside time throughout the year to organise your paperwork and understand your tax situation. This allows you to make informed choices and maximise your deductions and credits.

Deduction blind spots

The tax code offers a plethora of deductions to lessen your tax burden. However, many people miss out on these benefits simply because they aren't aware of them. Familiarise yourself with the common tax deductions available for your specific income bracket and life circumstances. This could include medical expenses, education costs, charitable contributions, and homeownership expenses. Don't leave free tax savings on the table.

Investing for taxes only

While certain investments offer tax benefits, prioritising them solely for tax breaks can be a tax planning mistake. Remember, these investments should align with your overall financial goals and risk tolerance. Thus, prioritise investments based on their long-term potential, diversification, and return on investment, not just their tax advantages.

Overlooking mistakes

Mistakes on tax forms happen and overlooking them can be costly. Carefully review your return before submitting it. Double-check your calculations, verify your deductions, check if you filled in the correct assessment year, and ensure all necessary documents are attached. If you're unsure about anything, seek professional help from a tax advisor to avoid penalties and audits.

Form 26AS and TDS mismatch

Failure to reconcile TDS with Form 26AS can impact your income tax return (ITR) filing. Before filing, carefully review Form 26AS, which includes income details, TDS, advance tax, and more. Salaried individuals must cross-verify details in Form 16 with Form 26AS. If TDS isn't reflected in Form 26AS, you may miss credits for deductions not mentioned. It's your responsibility to ensure Form 26AS is accurate. Discrepancies may reduce refunds or increase the taxes payable.

Handling Form 16 from multiple employers

When changing jobs, aggregate incomes from multiple Form 16s under the "income from salary" section for a seamless filing process.

Going solo

Understanding the intricacies of the tax code can be difficult. Don't be afraid to seek help from a qualified tax professional. A tax advisor can guide you through the process, ensure you're taking advantage of all available deductions and credits, and minimise your tax liability.

Paper trail woes

Keep meticulous records of all your income and expenses throughout the year. This includes receipts, invoices, bank statements, and any documents related to deductions you plan to claim. Having a well-organised system will make filing your return a breeze and save you from scrambling for documents at the last minute.

Ignoring technology

Embrace technology to simplify your tax filing experience. Many online tools and software programs can help you organise your documents, calculate deductions, and even file your return electronically. These tools can save you time, reduce errors, and ensure a smooth tax-filing process.

Not paying advance tax/ self-assessment tax

Ensure timely payment of advance tax or self-assessment tax to avoid interest and penalties. Clearing tax dues by March 31 of the financial year is crucial to prevent a 1% monthly interest accrual until the amount is settled.

By avoiding these common tax planning mistakes, you can confidently approach the tax filing season and keep more of your hard-earned money. Remember, tax planning is an ongoing process, not a one-time event. Start early, stay informed, and seek help when needed to navigate the complexities of the tax system. Happy filing!

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