To choose the correct ITR (Income Tax Return) form in India, you need to consider several factors such as your income type, income amount, and residency status. Filing Income Tax Returns (ITR) can be tricky, and many taxpayers make common mistakes that can lead to notices, delays in refunds, or even penalties. Here are the most frequent mistakes you should avoid while filing ITR (for AY 2025–26):
Here's a quick guide to help you choose the right ITR form for AY 2025–26 (FY 2024–25):
TAXES
Which ITR form should you pick?
ITR?1 (SAHAJ)
- Who can file: Resident individuals (not ordinarily resident) with:
- Total income ? ?50?lakh
- Income from salary/pension, one house property, and other sources (e.g. interest)
- LTCG under Section?112A up to ?1.25?lakh
- Agricultural income ? ?5,000
- Ineligible if: You’re a company director, hold unlisted shares, have foreign assets/income, deferred ESOP tax, or claim HRA with rent > ?1?lakh without PAN
ITR?2
- Who can file: Individuals or HUFs not having business/profession income
Income from multiple house properties, capital gains (including crypto), foreign assets/income, share buybacks, etc.
ITR?3
- Who can file: Individuals or HUFs having income from business or profession (including freelancers, gig work, F&O trading, etc.)
ITR?4 (SUGAM)
- Who can file: Residents (individual/HUF/firm other than LLP) with total income ? ?50?lakh
- Income under presumptive scheme (44AD, 44ADA, 44AE)
- Salary/pension, one house property, other sources, LTCG ? ?1.25?lakh
Other forms:
- ITR?5: Firms, LLPs, AOPs, BOIs
- ITR?6: Companies (except those under Section?11)
- ITR?7: Trusts, NGOs, institutions filing under Sections 139(4A–D)
What's new for AY?2025–26?
- LTCG exemption under Section?112A raised to ?1.25?lakh — if your LTCG is within this and no brought-forward losses, you can use ITR?1/4
- Asset-liability reporting threshold increased to ?1?crore total income (was ?50?lakh previously)
- Capital gains/disclosure updates: New reporting structure for share buybacks and distinguishing gains before/after 23 July 2024
- Mandatory TDS section codes and detailed deduction info now required in all forms
- Age restriction: Born on/after 1 April 2007 cannot file ITR?1
- Extended deadline: Filing date moved to 15 September 2025
How to choose:
- List your income sources (Salary, Business/Profession, Capital Gains, Rent, Other, Foreign).
- Check thresholds:
- If business/profession income ? ITR?3 (or ITR?4 if presumptive).
- If no business income:
- Simple (salary/pension + one house property + other sources, LTCG ?1.25?lakh) ? ITR?1.
- Complex (multiple properties, capital gains, crypto, foreign income) ? ITR?2.
- Apply ineligibility filters (foreign assets/income, shareholdings, director).
- Factor new changes (LTCG exemption, asset reporting, TDS codes).
Summary Table
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Income Profile
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Eligible Form
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Why
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Salary + one house + other sources, LTCG ?1.25?lakh
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ITR?1
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Simple returns, basic income
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Capital gains, crypto, multiple properties, foreign income
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ITR?2
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For non-business, complex income
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Business/profession income
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ITR?3 (or ITR?4 if presumptive)
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Self-employed, audits, gigs
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Presumptive business/profession (???50?lakh)
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ITR?4
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Easier presumptive scheme
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1. Choosing the Wrong ITR Form
- Using ITR-1 when you have capital gains, multiple house properties, or foreign assets is incorrect.
- If you have freelancing income, gig work, or trading (stocks, F&O), you likely need ITR-3, not ITR-1/2.
Fix: Use the ITR form that matches all your income sources and financial status.
2. Mismatch Between Form 26AS/AIS and ITR
- Income reported in Form 26AS or AIS (Annual Information Statement) is sometimes more than what you declare.
- Common mismatches: FD interest, TDS from contracts, rent, capital gains from mutual funds, etc.
Fix: Always reconcile ITR with Form 26AS, AIS, and TIS before filing.
3. Not Reporting All Income
- People often forget:
- Interest income from savings/FDs
- Dividend income
- Minor child’s income
- Cryptocurrency gains
- Foreign income
Fix: Disclose all sources, even if tax is already deducted (TDS).
4. Not Disclosing Foreign Assets or Income
- If you hold foreign bank accounts, stocks, crypto, or property, you must declare them, even if they don't generate income.
Hiding this may attract penalty under Black Money Act.
5. Claiming Wrong or Ineligible Deductions
- Incorrect Section 80C claims (e.g., claiming life insurance for siblings)
- Deductions for HRA when employer has not paid HRA
- Medical insurance claimed without premium proof
Fix: Claim only what's supported by valid proofs and is applicable to you.
6. Incorrect Bank Account Details
- Giving a wrong IFSC or account number delays refunds.
Fix: Re-check and validate your bank account for refund.
7. Skipping Verification After Filing
- Filing ITR is not complete unless you verify it within 30 days (e-verification or physical submission).
If you don’t verify, your ITR will be treated as not filed.
8. Filing After the Due Date
- You can file a belated return, but:
- You may lose some deductions (e.g., under 10AA, 54 series)
- You may have to pay penalties (?1,000 or ?5,000)
- Refunds get delayed
Fix: File on or before 15 September 2025 for AY 2025–26 (extended due date).
9. Incorrect Capital Gains Calculation
- Not accounting for indexed cost, brokerage charges, or set-off of losses
- Reporting total sale amount instead of only capital gains
Fix: Use correct acquisition and sale details. Use Schedule CG properly.
10. Skipping Aadhaar Linking or PAN Issues
- PAN not linked with Aadhaar can lead to invalid PAN ? ITR not processed.
Fix: Ensure PAN is linked to Aadhaar and both are active.
Pro Tips for Accurate ITR Filing:
- Use the pre-filled JSON or online ITR utility from incometax.gov.in
- Always cross-check with:
- Form 16 / 16A
- 26AS
- AIS/TIS
- Bank interest certificates
- Save a PDF copy of your final ITR and acknowledgement (ITR-V)
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