Filed the wrong ITR form? Penalties, missed refunds and what to do next

India Today

4 days ago

Every year, as the income tax return (ITR) deadline approaches, millions of taxpayers scramble to file their returns. You upload all the documents, check every box, and submit it right on time, only to later realise you picked the wrong ITR form. It may seem like a minor goof, but the consequences could be far from small.Whether you're a salaried professional, freelancer, or a business owner, choosing the right ITR (Income Tax Return) form is important. Getting it wrong might mean missed refunds, penalties, or worse, your return being treated as invalid.advertisementIndiaToday.in spoke to CA (Dr) Suresh Surana, to understand what happens when someone files the wrong ITR form, the risks involved, and how to correct the mistake.WHAT HAPPENS IF YOU PICK THE WRONG FORM?
Using the incorrect ITR form isn't a mere clerical slip. 'If a taxpayer files their Income Tax Return (ITR) using an incorrect form, it may lead to significant compliance issues,' warns Dr Surana.Legally, such returns can be flagged as 'defective' under Section 139(9) of the Income-tax Act, 1961. "The Income Tax Department may issue a notice to the taxpayer, providing an opportunity to rectify the defect within 15 days (extendable upon request). Failure to respond within the stipulated timeline can result in the return being treated as invalid, i.e., considered as not filed at all," he adds.WHY IT MATTERSadvertisementAn invalid return is not just a technical rejection, it can have serious implications. You may lose the chance to claim certain deductions, carry forward losses, or get your refund.You could also face late filing fees, penalties or prosecution in serious cases.LET'S TALK PENALTIESSurana explains, "If the return is filed in an incorrect form and is consequently treated as defective or invalid, it is deemed as non-filing of return under the law."For instance, there's a late filing fee of up to 5,000. If your total income is below Rs 5 lakh, the fee is capped at Rs 1,000. But that's just the beginning. You may also have to pay 1% interest per month for the delay under Section 234A. On top of that, you lose out on important tax breaks, such as the ability to carry forward business or capital losses, he explained.He cautions, 'In case, if the tax likely to have been evaded exceeds Rs. 25,00,000 had such failure of non-furnishing of return not been discovered, the term of imprisonment may range from 6 months to 7 years along with a fine.'WILL YOU LOSE YOUR REFUND?Using the wrong ITR form can also mess up your refund. The income tax system cross-checks your reported income with the form you've used. If there's a mismatch, it can result in notices, adjustments, or rejection of your return altogether.advertisement'If the wrong ITR form is used, the system may not capture the eligible refund claim appropriately, which may result in mismatch in data validation, leading to processing errors or automatic adjustments,' says Dr Surana.He further mentioned that if a taxpayer selects the incorrect ITR form, the return might be flagged as defective under Section 139(9), and the department may put processing on hold until it's fixed. In more serious cases, the return may be treated as invalid, and the taxpayer could lose out on any refund.FIXING THE ERROR: HERE'S HOWThankfully, not all is lost. 'If an Income Tax Return has been filed using an incorrect ITR form, the error can be rectified by submitting a revised return under Section 139(5) of the IT Act, provided the original return was filed within the prescribed due date,' states Surana.To do this, log in to the income tax e-filing portal, pick the right assessment year, and choose the correct form based on your income type, whether it's salary, capital gains, business income, or more. Don't forget to mention the acknowledgement number and filing date of the original return, explained the tax expert.advertisement'However, if the original return was filed after the due date (i.e., as a belated return), the option to revise is not available,' he warns.In that case, there's still hope. You can file an updated return under Section 139(8A), but only within 48 months from the end of the relevant assessment year. You'll also have to pay additional tax.DON'T LET IT SNOWBALLWhat starts as a simple mistake can quickly spiral into something much more serious. From losing deductions and refunds to facing penalties or legal action, the costs of filing the wrong ITR form can be heavy.As Surana sums it up, "It is important to ensure that the return is filed using the correct ITR form based on the nature of income and prescribed eligibility criteria."So, take your time, double-check the form, and don't hesitate to get expert help if you're unsure. In matters of tax, it's always better to be slow and correct than fast and wrong.- Ends