Income Tax Alert: Taxpayers Could Face 200% Penalty for These Common Filing Mistakes — Don't Risk It!

If you’re about to file your Income Tax Return (ITR), be careful — one wrong claim could cost you dearly! The Income Tax Department has issued a stern warning: taxpayers who misreport income or make false deduction claims could face a penalty of up to 200% of the tax due, plus interest. Here’s what you need to know to avoid hefty fines and unnecessary legal trouble.

New ITR Deadline Extended — But Be Careful What You Claim

The deadline for filing ITR-1 for non-audit cases has been extended to 15 September 2025, giving taxpayers more time to gather documents and file correctly. However, with this relief comes a clear reminder: do not make false or exaggerated deduction claims just to reduce your tax outgo.

Common deductions claimed include:

• Section 80C: for investments in Public Provident Fund (PPF), Equity-Linked Saving Schemes (ELSS), and tuition fees.

• Section 80D: for health insurance premiums.

• Section 80E: for education loan interest payments.

• Section 80TTA/80TTB: for interest earned on savings accounts.

Claim these only if you genuinely qualify and have valid proof. The tax department’s systems are getting smarter every year — and catching false claims is now easier than ever.

Heavy Penalties Under Income Tax Act

Under Section 270A of the Income Tax Act, 1961, taxpayers found guilty of under-reporting income or making unjustified deduction claims can be slapped with a penalty of up to 200% of the tax amount underpaid. In some serious cases, prosecution is also possible under Section 276C, which can lead to further legal complications.

So, the best way to avoid these risks is simple: file honest returns, claim only what you’re entitled to, and maintain proper proof for every deduction.

Choose the Right Tax Regime — Old vs. New

Remember, India now has two tax regimes: the new tax regime, which is the default, and the old tax regime. The new regime offers lower tax rates but removes most deductions, such as 80C, 80D, House Rent Allowance (HRA), and Leave Travel Allowance (LTA).

Under the old regime, you can still claim these deductions, but the tax rates are higher. So, before filing, compare your tax liability under both regimes using a reliable online calculator.

• Salaried individuals can choose to opt out of the default regime through their ITR form.

• Business owners and professionals must file Form 10-IEA to select their preferred regime.

• Always ensure that the regime you choose is the same as the one shared with your employer.

Keep All Supporting Documents Ready

To avoid scrutiny and notices from the tax department, keep all proofs organized and easily accessible. For example:

• 80C: PPF passbooks, ELSS statements, or receipts for tuition fees.

• 80D: Health insurance premium receipts.

• HRA: Rent agreement, landlord’s PAN if annual rent exceeds ₹1 lakh.

• Home Loan: Certificates for interest and principal repayment.

• Donations: Receipts from eligible institutions.

• 80E: Education loan interest certificates.

Match Your Data with AIS and Form 26AS

Always reconcile your declared income and deductions with the Annual Information Statement (AIS) and Form 26AS.

• AIS contains information about interest income, dividends, mutual fund transactions, and property sales.

• Form 26AS reflects your Tax Deducted at Source (TDS), advance tax, or self-assessment tax payments.

Any mismatch could lead to a notice, so check these documents carefully. If you spot an error, give feedback through the tax portal or reach out to the deductor to make corrections.

Avoid These Common Mistakes

• Don’t claim deductions under the new regime for sections like 80C or HRA where they’re not allowed.

• Never inflate expenses or make cash claims without proper documentation.

• Always verify your ITR — an unverified return is treated as invalid.

How to Verify Your ITR

After filing, you must e-verify your return within 30 days. You can do this easily via:

✅ Aadhaar OTP
✅ Net banking
✅ Pre-validated bank account
✅ Sending a signed ITR-V to the CPC office in Bengaluru

Bottom Line: File Smart, File Honest

The Income Tax Department’s systems are more robust than ever. Filing your ITR with inaccurate information may save you a little money now, but it could cost you a fortune later — not to mention the stress of facing penalties or prosecution.

Be diligent. Keep valid proofs. Double-check your numbers. And if you’re confused about which tax regime works better for you, don’t hesitate to consult a tax advisor.

A little caution now can save you from paying double (or triple) the price later!