“I don’t expect the ITR filing deadline to be pushed any further,” said Prakash Hegde, chartered accountant (CA) at Acer Tax & Corporate Services. “Another extension would create a cascading impact on returns requiring audits. With the audit deadline fixed at 30 September, tax professionals are already under pressure.”
Leaving tax filing until the last minute carries its own risks. Important disclosures might be overlooked, or supporting documents may be unavailable. New regulations can also confuse taxpayers if the finer details are overlooked.
For instance, equity capital gains up to ₹1.25 lakh can now be reported in ITR-1 as they are exempt from tax. But taxpayers unaware of the fine print have filed their ITR in Form 1 incorrectly. “Incorrect form selection triggered 1.65 lakh scrutiny cases under Section 143(2) this year. Say someone used ITR-1 when equity gains are below ₹1.25 lakh but there are losses to carry forward or they have foreign assets will render the return defective,” said CA Bhawna Kakkar, founder, Kakkar & Company.
Most importantly, rushing can also cause you to miss mandatory disclosures. Schedule FA (Foreign Assets) requires details such as acquisition cost, current value, peak value, location, and income from foreign assets held during the year. Schedule AL obliges taxpayers with income above ₹1 crore (raised from ₹50 lakh this year) to report all assets and loans used to acquire them. Gathering this information can be time-consuming.
Missing the deadline is costly. Belated returns can be filed until 31 December but attract penalties of ₹1,000 for income up to ₹5 lakh, while ₹5,000 for others. Late filing also prevents carrying forward capital losses and interest on outstanding tax continues to accrue.
“The interest on late tax payment has already increased from 4%, which is what taxpayers pay by July, to 6% in September. The impact can be significant that taxpayers don’t realise,” Hegde said.
Mint outlines key updates, reporting requirements and common mistakes to help last-minute taxfilers to submit their ITR accurately and on time.
LTCG and STCG reporting
One of the biggest changes this year is the bifurcation of equity transactions. Taxpayers are required to report equity sales that happened before 23 July 2024 and on or after this date separately. This bifurcation stems from amendments made in capital gains taxation by the Budget 2024, which taxes long-term capital gains (LTCG) at a higher rate of 12.5%. Failure to distinguish transactions correctly could lead to mismatches or unnecessary tax notices.
Reporting debt investments is even more complex. Tax rules for debt funds changed significantly from 1 April 2023, and this is the second assessment year requiring careful reporting. For debt MF investments made on or after 1 April 2023, all gains are treated as short-term, regardless of holding period and taxed as per your income slab.
For investments made before 1 April 2023, gains can still be short-term or long-term, but the holding period rules have changed, adding another layer of complexity.
Budget 2024 changed LTCG holding period on listed debt instruments sold on or after 23 July 2024 to two years from the erstwhile three years. This change in holding period extends to debt MF units that were bought before 1 April 2023.
So, any units bought before April 2023 need a three-year holding to qualify as LTCG if sold before 23 July 2024 and only 2 years if sold after. “The ITR utility is calculating tax on debt MFs as per this rule,” said Hegde.
This would mean if you invested in debt MFs through SIPs, you need to distinguish between units purchased before and after 1 April 2023 and these units sold before and after 23 July 2024 to correctly report them under LTCG and STCG sections.
“Manual identification of pre- and post-April 2023 and pre- and post-23 July 2024 units can be confusing, particularly for SIP investors with multiple transactions over time. Moreover, many taxpayers are not aware of the changes. Misreporting can lead to incorrect calculation of capital gains,” said Hegde.
With last-minute filing, this detail is easy to miss but can make a significant difference in tax liability.
Hegde pointed out that in the earlier year the Budget had changed taxation of mutual funds that invest 35% or less in domestic equities and classified them as specified mutual funds. “This classification covers international funds, exchange-traded funds (ETFs), gold ETFs and gold mutual funds. So, for FY 2023–24 and FY 2024–25, these funds are taxed in the same way as debt funds–gains will be treated as STCG, without the benefit of indexation,” he explained.
AIS inaccuracies
Itesh Dodhi, director, Nangia & Co LLP, said the tax laws require reporting entities such as banks, mutual funds, sub-registrars and employers to file statements for financial transactions (SFT), basis which the annual information statement (AIS) is populated. All transactions shown in AIS must be reported.
“In the last-minute rush, taxpayers often fail to check AIS and skip reporting exempt income like PPF or Sukanya Samriddhi Scheme interest or forget some bank accounts. Any mismatch or omission could invite scrutiny,” Dodhi said.
AIS may also miss some incomes, such as interest on Sovereign Gold Bonds (SGBs). “The 2.5% annual interest that is fully taxable under “Income from Other Sources,” does not always reflect in AIS or Form 26AS, requiring taxpayers to proactively report it,” Kakkar said.
Reconciling AIS with TDS certificates and Form26AS is also important as information related to interest income, dividends etc is pre-filled in the utility basis information from AIS, said Akhil Chandna, partner & global people solutions leader, Grant Thornton Bharat.
This year, several issues have been flagged in AIS.
Equity transactions sometimes show inflated sale values due to duplicate entries from depositories, brokers or Registrar and Transfer Agents (RTAs). Sometimes, broker-reported sale prices of shares differ from depositories, which report closing prices.
CAs have also noted that interest on fixed deposits is shown entirely in the year of maturity, though it is taxed annually on accrual. This inflates the net taxable income in the year.
In such cases, taxpayers should file ITR based on the actual figures as per Form 26AS/TDS, said Chandna. “Form 26AS and TDS certificates (Form 16/16A/16B/16C) remain the legal basis for claiming credit, while AIS is a wider information tool that can sometimes show errors or duplications.”
However, taxpayers must report mismatches in AIS to the tax department using the feedback option. Otherwise, the department may assume that the information in AIS is correct, but you have misreported it in ITR.
Since the deadline is approaching, don’t wait for the AIS to be rectified, Chandna warned. “The safer approach is to file ITR based on the actual data and let AIS corrections flow through subsequently. Timely filing with proper disclosure is always better than risking late fees or notices.”
Greater disclosures under the old regime
Taxpayers opting for the old regime, which allows various deductions and exemptions, need to brace for more extensive disclosures this year. Information relating to house rent allowance exemption, deductions under Sections 80C and 80D, as well as interest paid on housing and education loans, has to be reported in greater detail than before.
The new tax regime has fewer deductions, but those with home loan interest for rented property will still need to report these details, said Hegde. “It could mean hurried filers may find themselves scrambling for loan certificates and sanction letter at the last moment.”
Finally, a procedural but critical step is the verification of the ITR that must be done within 30 days. “Failure to verify renders the return invalid, and this small oversight is surprisingly common when people file at the eleventh hour,” said Hegde.
With less than 10 days left before the deadline, if you are sitting to file your ITR now, ensure every detail is cross-verified and know the main changes this year to avoid the common pitfalls of last-minute filing.