Introduction

For salaried employees in India, filing an Income Tax Return (ITR) is not just a formality but a crucial financial responsibility. A seemingly minor error can lead to unexpected tax demands and scrutiny from the Income Tax Department. By understanding and avoiding these common pitfalls, you can ensure a smoother tax filing experience.

Choosing the Incorrect ITR Form

One of the most common mistakes is selecting the wrong ITR form. While ITR-1 is suitable for salaried employees with income solely from salary and interest, those with additional income streams need to be more cautious. For instance, if you have income from capital gains, house property, or foreign assets, you must opt for ITR-2 or ITR-3. A practical scenario is when a salaried employee sells mutual funds during the financial year. In such cases, using ITR-1 would be incorrect, and ITR-2 should be used instead to report capital gains accurately.

Mismatch in TDS and Income Details

A mismatch between your TDS details and income can trigger scrutiny. Ensure that the TDS details in your Form 16 align with your income records. Cross-verifying your TDS credits with Form 26AS is crucial. For example, if your employer deducts TDS but it doesn't reflect in Form 26AS, it could lead to a demand notice. Always ensure that the TDS entries are correctly reflected to avoid such issues.

Omitting Income from Other Sources

Many salaried individuals overlook income from other sources, such as interest from savings accounts or fixed deposits. This oversight can lead to penalties. For instance, if you earn interest from a savings account exceeding ₹10,000, it needs to be reported even if it is eligible for a deduction under Section 80TTA. Neglecting to report such income can result in a demand notice from the tax department.

Not Reporting Exempt Income

Exempt income, though not taxable, must still be reported in your ITR. This includes income like PPF interest or agricultural income. Failing to report exempt income can raise red flags during scrutiny. For example, if you have agricultural income exceeding ₹5,000, it must be reported in ITR-2. Transparency in reporting ensures compliance and reduces the risk of scrutiny.

Ignoring AIS and Form 26AS Discrepancies

The Annual Information Statement (AIS) and Form 26AS are comprehensive records of your financial transactions. Any discrepancies between these documents and your ITR can lead to scrutiny. For instance, if your AIS reports a high-value transaction that you haven't declared, it could invite a notice. Regularly reviewing these statements and addressing discrepancies promptly is essential for accurate filing.

Conclusion and Compliance Tips

To avoid unexpected tax demands, salaried employees should:

• Choose the correct ITR form based on their income profile, especially if they have capital gains or foreign income.
• Cross-check TDS details with Form 26AS to ensure accuracy.
• Include all income sources, including exempt income, to maintain transparency.
• Review AIS for any discrepancies and address them promptly to avoid scrutiny.
• File the ITR before the due date of 31 July 2026 to avoid penalties.

By adhering to these compliance steps, salaried employees can ensure a hassle-free tax filing experience and avoid unexpected tax demands.