Filing Income Tax Return? What You Need to Know to Avoid ₹1.5 Lakh Fine

July 3, 2025: Income Tax Return – As the income tax filing deadline nears, financial experts are urging taxpayers to proceed with caution to avoid costly mistakes that could lead to penalties, delayed refunds, or notices from the Income Tax Department.

One of the most frequent errors reported is the selection of the wrong Income Tax Return (ITR) form. Different forms cater to different categories of income: for example, ITR-1 (Sahaj) is intended for salaried individuals earning up to ₹50 lakh, while ITR-2 is designed for those with capital gains, multiple properties, or foreign assets. Business owners should file ITR-3, and those under the presumptive taxation scheme should use ITR-4 (Sugam). Filing an incorrect form can result in the return being marked as ‘Defective,’ requiring rectification within 15 days to avoid invalidation.

Taxpayers are also advised to carefully verify Form 26AS and the Annual Information Statement (AIS) before submitting their returns to prevent refund delays or excess tax payments. Salaried individuals must keep their Form 16 and other relevant documents, such as home loan statements, capital gains records, and dividend income proofs, handy.

Verification of the return is a critical step that must be completed within 30 days of filing. E-verification methods include Aadhaar OTP, net banking, or Demat accounts. Alternatively, taxpayers can send a signed ITR-V form to the Centralized Processing Centre (CPC) in Bengaluru. Failure to verify will render the filing incomplete.

Late filings carry penalties of ₹5,000 for incomes above ₹5 lakh and ₹1,000 for incomes below that threshold. Submitting inaccurate information can attract a penalty of 50% of the tax dues, escalating to 200% in cases of deliberate misreporting. Businesses failing to maintain proper books or submit audit reports on time may face fines up to ₹1.5 lakh.

Experts recommend filing returns early, double-checking all details, and choosing the correct tax regime to avoid unnecessary financial and legal troubles this tax season.