Common Mistakes to Avoid in Income Tax Return Filing in Mumbai

Filing your income tax return is an important financial responsibility for every individual and business in India. Whether you are a salaried employee, self-employed professional, or business owner, accurate and timely income tax return filing in India ensures compliance with tax laws and helps you avoid unnecessary penalties or scrutiny. However, many taxpayers, especially in metropolitan cities like Mumbai, often make avoidable mistakes that can lead to complications later.

This blog by Mohit S. Shah & Co explains the most common mistakes people make during income tax return filing in Mumbai and how to avoid them for a smooth, error-free filing experience.

1. Not Reporting All Sources of Income

One of the biggest errors taxpayers make is failing to report all their income sources. Many individuals report only their salary income but forget to include other earnings such as:

• Interest from fixed deposits or savings accounts

• Rental income from property

• Freelance or part-time income

• Capital gains from stock or crypto investments

Even if the income seems small, it must be declared. The Income Tax Department can easily trace unreported income through PAN-linked records and TDS details. Hence, during income tax return filing in India, always gather income details from all sources to ensure complete disclosure.

2. Choosing the Wrong ITR Form

Selecting the correct Income Tax Return (ITR) form is essential. The form you use depends on your income type, category, and residential status. Many taxpayers in Mumbai choose the wrong ITR form, which may result in the return being marked as defective or even invalid.

For instance:

• ITR-1 is for individuals with income up to ₹50 lakh from salary, one house property, and other sources.

• ITR-3 or ITR-4 is for professionals or those having business income.

Before starting your income tax return filing in Mumbai, ensure that you select the appropriate form as per your income type and eligibility.

3. Ignoring Form 26AS and AIS

Form 26AS and the Annual Information Statement (AIS) contain details of taxes deducted at source, advance tax paid, and financial transactions linked to your PAN. Many taxpayers skip verifying these documents before filing their returns.

A mismatch between your tax credit details and the information in your return can trigger an income tax notice. Always cross-check Form 26AS and AIS before proceeding with income tax return filing in India to ensure that all your TDS entries are correctly reflected.

4. Missing the Deadline for Filing

Timely filing of your tax return is crucial. The due date for most individual taxpayers is usually 31st July of the assessment year, unless extended by the government. Late filing attracts interest and penalties under Sections 234F and 234A.

If you live in a busy city like Mumbai, where people often delay tasks until the last moment, missing the deadline for income tax return filing in Mumbai is quite common. Start collecting your financial documents well in advance and aim to file early to avoid last-minute errors.

5. Incorrect Bank Account Details

Providing wrong or incomplete bank details can delay your refund. Always ensure that you provide the correct account number, IFSC code, and link your account with your PAN. It’s also important to pre-validate your bank account on the income tax portal.

Many taxpayers overlook this step, resulting in refunds being delayed or not processed at all. During income tax return filing in India, double-check all bank details to ensure smooth refund processing.

6. Not Disclosing Foreign Assets or Crypto Income

With the growing popularity of digital assets and global investments, it’s crucial to declare foreign holdings and crypto income accurately. If you have income from cryptocurrency trading or foreign bank accounts, you must report it under the relevant sections.

Non-disclosure can lead to penalties under the Black Money Act or scrutiny by the tax department. Crypto tax filing in India requires special attention, as digital assets are taxed differently from regular income. Professional guidance from experts like Mohit S. Shah & Co can help you correctly report and file taxes on crypto income.

7. Incorrect Claim of Deductions and Exemptions

Tax deductions under Sections 80C, 80D, 80G, and others can reduce your taxable income. However, claiming incorrect deductions or forgetting to claim eligible ones is a common error.

For example:

• Many people forget to claim deductions for health insurance premiums (80D) or donations (80G).

• Some claim deductions without having valid supporting documents.

Always verify your eligibility before claiming any deductions during income tax return filing in Mumbai. Keep receipts and proof ready in case of a future inquiry from the department.

8. Not Reconciling TDS with Form 16

Salaried employees in Mumbai often depend entirely on their Form 16 for filing returns. However, sometimes employers may make TDS errors or delays in updating details. If the TDS in your Form 16 doesn’t match the details in Form 26AS, your return may be processed incorrectly.

Before filing, cross-verify both documents to ensure there are no mismatches. This simple step can prevent unnecessary hassles and delays in refund processing.

9. Filing Returns Without Verifying Them

After submitting your income tax return online, you must verify it electronically (through Aadhaar OTP, net banking, or EVC) or send a signed physical copy to the Central Processing Centre (CPC). Many taxpayers forget this step, making the return invalid.

Your return is considered complete only after successful verification. Hence, always ensure verification within 30 days of filing your ITR.

10. Not Taking Professional Assistance

While online filing portals have made the process easier, not everyone understands tax laws thoroughly. Filing returns without guidance can result in overlooked income, wrong deductions, or calculation errors.

Professionals like Mohit S. Shah & Co offer expert support in income tax return filing in Mumbai, helping individuals and businesses file correctly and on time. They also assist in specialized cases such as crypto tax filing in India, ensuring compliance with the latest tax laws and reporting requirements.

11. Failing to Maintain Records and Proofs

Taxpayers must maintain records of their income, investments, and deductions for at least six years. These documents may be required for verification or in case of a tax audit.

Unfortunately, many individuals discard old receipts or bank statements soon after filing. Maintaining an organized file—digitally or physically—helps ensure smooth future assessments or revisions.

12. Ignoring Advance Tax or Self-Assessment Tax

Individuals with non-salary income such as rent, interest, or business profits must pay advance tax if the total tax liability exceeds ₹10,000 in a financial year. Many taxpayers forget to do this, resulting in interest penalties.

Before starting income tax return filing in India, calculate your total tax liability and ensure advance tax payments are made and correctly reflected in Form 26AS.

Conclusion

Filing your income tax return correctly and on time is not just a legal obligation but a step toward financial discipline. Avoiding the common mistakes discussed above can save you from penalties, notices, and stress during income tax return filing in Mumbai.

Whether you are a salaried employee, freelancer, or crypto investor, it’s crucial to understand your tax responsibilities and report your income transparently.

For individuals and businesses seeking professional help, Mohit S. Shah & Co offers expert guidance in income tax return filing in India and crypto tax filing in India, ensuring complete compliance, accuracy, and peace of mind.