Have you ever filed your income tax return thinking everything was sorted, only to discover that you still owe tax? You’re not alone. Many salaried employees assume that because tax is deducted from their salary every month, there is nothing more to worry about. But when it comes time to file the ITR, some are shocked to find an additional tax bill waiting for them.
Tax experts say that a few common mistakes can lead to unexpected tax demands, interest charges and even scrutiny notices. As the filing season approaches, employees may want to double-check their tax details before hitting the submit button.
Let us look at seven common mistakes that could trigger unexpected tax demands.
A mismatch in salary income reporting is one of the common reasons a tax return may attract attention from the Department. Taxpayers should ensure that the salary income disclosed in their ITR matches the figures reported in Form 16, the employer’s TDS returns and the Annual Information Statement (AIS).
CA (Dr) Suresh Surana said, “Where salary income reported in the ITR differs from the salary disclosed in Form 16, TDS returns filed by the employer, or reflected in AIS, the department may seek clarification regarding any under-reporting of income.”
Any discrepancy between these records may raise questions about the accuracy of the return and could prompt the tax department to seek explanations or undertake further scrutiny.
Many employees initially declare investments, HRA claims or housing loan benefits to reduce monthly TDS.
However, if supporting documents are not submitted before the employer’s deadline, those claims may be rejected for TDS purposes. This often results in higher tax deductions towards the end of the financial year and can affect take-home salary.
Interest from bank deposits, rental income, freelance earnings, dividends and other income sources are often overlooked.
“Interest earned on savings bank accounts, fixed deposits (FDs), recurring deposits (RDs), income tax refunds, etc. often appears in AIS based on reporting by banks and financial institutions. Non-disclosure or partial disclosure of such income in the ITR may result in a mismatch notice,”said Surana.
According to Surana, this is an area where many taxpayers make mistakes.
“High-value financial transactions not disclosed – Transactions such as large mutual fund investments, purchase or sale of immovable property, substantial credit card payments, foreign remittances, or securities transactions reflected in AIS but not aligned with declared sources of income may attract scrutiny,” he said.
He also warned taxpayers about reporting errors related to investments.
“Capital gains mismatch – Sale of shares, mutual funds, property, or other capital assets may be reported in AIS by intermediaries. However, incorrect computation or omission of capital gains in the ITR could trigger an inquiry,” he added.
Some taxpayers declare higher investments than they actually intend to make, hoping to increase monthly cash flow during the year.
If those investments are ultimately not made, the tax shortfall has to be recovered later. This can create an unpleasant surprise during the final quarter or while filing the return.
Many salaried employees assume advance tax rules apply only to business owners. That is not always true.
If a person has substantial income from sources other than salary and the tax liability remains unpaid during the year, interest may be charged for short payment of advance tax.
Regularly estimating total annual income can help avoid such surprises.
Form 26AS and the Annual Information Statement (AIS) contain valuable information about income, taxes paid and high-value transactions.
Failing to review these documents can lead to omissions or mismatches in the return, increasing the chances of receiving notices or tax demands later.
In other words, for salaried employees, tax planning is no longer just about finding deductions and saving money. It is also about avoiding unpleasant surprises.
A missed income entry, an unreported capital gain or an incorrect declaration may seem like a small oversight today, but it could lead to additional tax, interest charges and unnecessary stress at the time of filing. Taking a few extra minutes to review the details now can help prevent a much bigger headache later.