With the Income Tax Return (ITR) filing deadline for Assessment Year (AY) 2025–26 extended to September 15, 2025, for select categories, many taxpayers have already begun submitting their returns, especially after receiving Form 16. However, tax experts caution that even minor mistakes or incorrect claims in your ITR can invite hefty penalties — up to 200% of the tax payable.
ITR Filing Errors Can Be Costly
According to Sandeep Sehgal, Partner – Tax at AKM Global, “Inaccurate disclosures, hidden income, or making false claims for deductions and exemptions can attract severe penalties under the Income Tax Act, 1961. As per Section 270A, under-reporting of income due to errors can lead to a 50% penalty on the tax payable.”
Worse still, deliberate misreporting of income — such as submitting fake rent receipts, claiming deductions without valid proof, or failing to disclose income from freelance work or cryptocurrencies — can result in a 200% penalty on the tax payable.
Common Triggers for Penalties
Misreporting of income can arise from:
✅ Suppression or non-disclosure of facts
✅ False entries in books of accounts
✅ Claiming deductions under Section 80C or exemptions under Section 10 without valid supporting documents
✅ Concealing income from cryptocurrency, freelance work, gig economy, or foreign sources
Additionally, Section 271AAD of the Income Tax Act empowers tax authorities to impose a penalty equivalent to the amount of any false or omitted entry detected during scrutiny.
Wrong ITR Form? It Can Also Invite Penalties
Many taxpayers unknowingly select the wrong ITR form, which can result in unintentional non-reporting of income. This too can lead to:
✔️ 50% penalty for under-reported income
✔️ 200% penalty for misreported income
ClearTax also warns that incorrect ITR form selection is a frequent yet costly mistake.
No Escape for Errors by Tax Consultants
Taxpayers should remember that reliance on a Chartered Accountant (CA) or tax consultant does not absolve them of responsibility. As Sehgal explains, “The legal accountability for accurate tax filing always lies with the taxpayer, not the preparer.”
Interest and Legal Consequences
Apart from penalties, incorrect or incomplete ITR filings may attract interest under Sections 234B and 234C for short payment or late payment of taxes. In serious cases of willful misreporting or tax evasion, prosecution may also follow.
How to Avoid Penalties While Filing ITR
To stay compliant and avoid unnecessary penalties, taxpayers should:
✔️ Report all income sources accurately, including salary, freelance, rental, capital gains, crypto, etc.
✔️ Select the correct ITR form based on income and filing category
✔️ Maintain valid documentation for all deductions, exemptions, and income disclosures
✔️ Revise or update returns promptly if errors are discovered after filing
Filing Revised or Updated ITR Can Save You
Voluntarily filing a revised or updated return within the prescribed timelines can help reduce penalties and avoid legal action. As experts suggest, honesty and timely correction of mistakes is the best strategy to stay penalty-free.
Final Words
ITR filing may seem routine, but even small mistakes can attract heavy financial and legal consequences. Stay vigilant, consult trusted experts, and double-check your returns to ensure full compliance with tax laws. Remember, when it comes to taxes, accuracy and transparency are your best safeguards.