First-Time ITR Filers, Beware: These 8 Common Mistakes Can Cost You Heavily

Filing your Income Tax Return (ITR) for the first time can be overwhelming. While the process may seem straightforward, many first-time taxpayers unknowingly make mistakes that lead to delayed refunds, unnecessary scrutiny, or even penalties. Whether it’s choosing the wrong form or missing crucial income details, such errors can become problematic down the line.

Here's a comprehensive guide on the 8 most common mistakes first-time ITR filers make—and how you can avoid them.

1. Choosing the Wrong ITR Form

Selecting the right ITR form is the most crucial step. The Income Tax Department has defined seven types of ITR forms, each suited for different income sources and taxpayer categories.

ITR Form Suitable For

ITR-1	Individuals with income up to ₹50 lakh from salary, one house, or other sources
ITR-2	Individuals with income above ₹50 lakh, capital gains, more than one house, foreign income/assets, or who are company directors
ITR-3	Individuals earning from business/profession, including crypto as business income, or firm partners
ITR-4	Residents or HUFs with presumptive income under sections 44AD, 44ADA, or 44AE (up to ₹50 lakh)
ITR-5	Firms, LLPs, AOPs, and BOIs
ITR-6	Companies not claiming exemption under section 11
ITR-7	Persons or institutions filing under sections like 139(4A), 139(4B), etc.

Tip: Use official resources or consult a CA to identify the correct form.

2. Ignoring AIS and Form 26AS

Most first-time filers rely solely on Form 16 provided by their employer. However, overlooking the Annual Information Statement (AIS) and Form 26AS is a big mistake. These forms show the actual income reported by banks, mutual funds, employers, and TDS/TCS details.

Tip: Cross-check all income entries in AIS and 26AS to ensure your return matches the reported data.

3. Not Reporting All Income and Losses

Taxpayers often report only taxable income but fail to disclose exempt income (like interest from PPF) or capital losses. Omitting such information may cause issues during scrutiny, especially under the old tax regime.

Tip: Disclose all income sources, even tax-free ones, and claim losses properly to carry them forward if eligible.

4. Lack of Proper Documentation

Claiming deductions without keeping supporting documents is another critical error. If selected for an audit, you're required to provide proof of deductions—like investment certificates, insurance premiums, or medical bills.

Tip: Keep all deduction-related proofs saved digitally and physically for future reference.

5. Misclassifying Income Categories

Incorrectly categorizing income is a common yet serious mistake. For instance, reporting freelance earnings as salary or short-term capital gains as long-term can lead to incorrect tax calculations.

Tip: Understand each income head and report accurately.

6. Not Reporting Foreign Shares or Assets

Employees working with MNCs often receive foreign shares or dividends, which must be reported under foreign assets. Also, capital gains and dividends from foreign shares are taxable and may qualify for relief under Double Taxation Avoidance Agreements (DTAA).

Tip: Disclose all foreign assets and use DTAA benefits when applicable to avoid penalties.

7. Failing to Report All Bank Accounts

Many first-time filers disclose only their salary account, ignoring savings or NRO (Non-Resident Ordinary) accounts. The IT Department mandates reporting of all bank accounts, not just the active ones.

Tip: Provide full details of all domestic and NRO accounts, including account numbers and IFSC codes.

8. Skipping E-Verification

Filing an ITR is only the first step. If you fail to e-verify your return within 30 days, the ITR will be considered invalid. E-verification can be done via Aadhaar OTP, net banking, or electronic verification code (EVC).

Tip: Always complete e-verification immediately after filing to avoid complications.

Conclusion

Filing your Income Tax Return accurately and on time ensures you stay compliant and avoid future hassles. Whether you’re a salaried employee or freelancer, these common missteps can derail your tax filing process. Stay informed, verify your data, and when in doubt—consult a tax expert.