ITR Filing Mistakes Freshers Make During Their First Job

Your first job is a great achievement: you are now responsible for your own finances and get your pay cheque. The new terminology and the deadlines can sometimes cause confusion with beginning investors and cause inadvertent ITR filing mistakes. This article discusses the common issues faced by freshers and offers some tips to make filing your tax liability for your first few years of service as simple as possible.

What is ITR Filing?

An Income Tax Return (ITR) can be thought of as a formal declaration to the tax authorities. It includes information about your total income from every source and the taxes you paid on that income. Imagine it is a financial report card and you're paying it to the government annually.

If your earned income exceeds the basic exemption limit, filing an ITR is not just to save tax but also a legal requirement for an individual in his first job. If your company has already deducted the Tax Deducted at Source (TDS), you should still submit a return to report the final tax liability. The files serve as evidence of your income, a key requirement for car loan applications, home loan applications and other future applications for a visa.

It includes the collection of paperwork such as Form 16, bank statements, and investment statements. The first step to avoid ITR filing errors is to determine the right form (ITR-1 or ITR-2) that fits your taxable income.

Common ITR Filing Mistakes 

New to the corporate world, you may find the jargon used in the finance department confusing. The most common tax filing errors freshers make for their first job tax filing are the following:

• Choosing the Wrong ITR Form: This is one of the most common mistakes. When a fresher asks about the form they should use, they believe that everyone with a salary will use the same form. Nonetheless, if you have sold stocks and have capital gains or earn income from multiple house properties, ITR-1 may not be suitable. If the wrong form is used, it may be considered "defective", and you will have to return it.

• Ignoring Interest Income: Many of those who are beginners in the field think that only the "defective" is taxable. In reality, interest income that is earned on a savings account, recurring deposit, and fixed deposit is taxable. The Income Tax Department may identify mismatches in reported income through PAN-linked financial records.

• Depending Only on Form 16: Form 16 is a certificate that is issued by your employer, but it does not always give you a full picture of your finances. Form 16 is enough for an accurate ITR only if they didn't change their jobs in the year or earned income from freelance gigs.

• Not Checking Form 26AS and AIS: Form 26AS and Annual Information Statement (AIS) are like your tax passbooks. They display all taxes that are deducted from you. Failure to consult these may result in missing out on taking advantage of credit for previously paid taxes.

• Incorrect Bank Details: If the bank account information provided is inaccurate and not pre-validated in the e-filing portal, it will be impossible to receive a tax refund. If you miss a character in the IFSC code or account number, it can cause your refund to be delayed for months.

• Forgetting to E-verify: It is not just filing the return. It has to be e-verified within the prescribed time limit set by the Income Tax Department. Otherwise, your ITR will be invalid and treated as if you did not file it.

• Not Reporting Income from Multiple Employers: If you changed employers during the year, you'll need to report income from both employers. Occasionally, the second employer may not be accountable for the income earned from the first employer, and the TDS is deducted at a lower rate, which increases the tax liability during the filing season.

How to Avoid ITR Filing Mistakes

It takes a systematic approach to correct or prevent these errors. Don't worry if you made a mistake; the tax department will accept a "revised return". You can address and avoid these problems in the following ways:

Check All Income Sources

Prior to beginning the filing process, make a list of all the ways you earned income for the year. This includes whatever you earn, any bonuses, interest that you get from your bank, dividends from stocks, or even the small prizes from online contests. A comprehensive list ensures that there are no income omissions.

Match Details with Form 26AS and AIS

Please download your AIS and Form 26AS from the Income Tax portal before filing. Compare the amounts on these documents with your pay slips and bank statements. If there is any mismatch, such as an entry missing from the TDS, contact the deductor immediately to resolve the issue.

File a Revised Return if Needed

If you discover that you have made an error after submitting your return, then you may file a corrected return as per Section 139(5). This is a substitute filing for your original filing. One should confess and correct one's mistake rather than wait for an order from the authorities.

Claim All Eligible Deductions

Freshers often fail to claim deductions, as they are unaware of their eligibility. Make sure you’re taking advantage of Section 80C deductions (such as ELSS, PPF, and LIC), Section 80D (health insurance), and even the standard deduction, which is available to everyone with a salary! This will lower your taxable income and prevent you from paying too many taxes.

Keep Your E-filing Profile Updated

Check contact information, particularly mobile phone and e-mail address, on the e-filing portal. This guarantees that you can get all the communications and one-time passwords (OTPs) you need for e-verification on time.

How Freshers Can Learn ITR Filing

Tax knowledge is a skill that is not commonly taught in the classroom. Many freshers lack practical understanding of income tax filing, which often creates confusion during their first job. Learning the basics of tax filing early can help you avoid common ITR filing mistakes and manage your finances with more confidence.

This section focuses on helping beginners understand the filing process in a simple and practical way. Here’s why learning proper tax filing is important:

• Learn Tax Filing Step by Step: Complex tax terms and filing steps become easier to understand with practical examples and beginner-friendly explanations.

• Understand ITR Forms and Deductions: Learning the filing process properly helps freshers understand how to file ITR-1 or ITR-2 accurately.

• Improve Tax Compliance Knowledge:  Understanding tax basics helps reduce the chances of errors that may lead to notices or delayed refunds.

• Financial Knowledge: Learning about deductions, taxable income, and refunds helps freshers make better financial decisions from the start of their careers.

• Long-Term Benefits: Building tax awareness early can help in future financial planning, loan applications, and investment decisions.

Understanding how income tax filing works is not just useful for compliance but also an important step toward becoming financially aware and independent.