Introduction
Every year, millions of Indians rush to file their Income
Tax Returns (ITR) online, often without professional help. With easy-to-use
portals and free filing options, filing taxes independently may seem like a
cost-saving move. However, tax experts warn that a simple error in reporting
income, claiming deductions, or interpreting provisions can cost far more than
the professional fees saved. The risks range from financial penalties to
scrutiny notices and even delayed refunds.
Background & Context
India’s tax compliance system has undergone significant
digital transformation over the past decade. The Income Tax Department now
provides an upgraded online portal, pre-filled ITR forms, AI-powered error
checks, and mobile app support. While these tools have made the filing process
accessible to the average taxpayer, the complexity of tax laws remains unchanged.
Taxpayers often underestimate nuances such as:
- Multiple
sources of income (salary, interest, capital gains, foreign income).
- Applicability
of new rules under the Finance Act.
- Deduction
eligibility under various sections (80C, 80D, 80G, etc.).
- Reporting
of foreign assets under the Black Money Act.
- Clubbing
provisions for minor children’s income.
A Chartered Accountant (CA) or tax professional ensures
compliance with these complexities, but many individuals prefer the DIY route,
especially first-time earners and freelancers.
Main News Story
Why Filing ITR on Your Own Can
Backfire
While self-filing seems cheaper, the hidden costs emerge
when errors occur. Common mistakes include:
- Incorrectly
selecting the ITR form.
- Failing
to disclose high-value transactions or foreign assets.
- Mismatches
between Form 26AS/AIS and reported income.
- Misreporting
capital gains from stocks, mutual funds, or crypto assets.
- Over-claiming
deductions without proper documentation.
These mistakes can trigger notices under Section 143(1)
(intimations) or Section 143(2) (scrutiny). In some cases, penalties
under Section 270A for underreporting or misreporting income may apply,
ranging from 50% to 200% of the tax amount.
Latest Data from the Tax Department
According to the Central Board of Direct Taxes (CBDT), over 8.18
crore ITRs were filed in FY 2023-24, with nearly 80% filed online. However,
the department reported a rise in error-prone self-filed returns,
particularly among salaried individuals with additional income from stock
trading, freelancing, or rent.
Expert Opinions & Reactions
Rohit Kumar, Senior Chartered Accountant: “Most people believe filing an ITR is just about entering
salary details and clicking submit. But if you have capital gains, multiple
deductions, or foreign income, the wrong disclosure can lead to years of
scrutiny. Hiring a professional might cost ₹2,000–₹5,000, but it saves lakhs in
penalties later.”
Priya Mehta, Tax Policy Analyst: “Self-filing works best for salaried individuals with only
one source of income. Once multiple income heads are involved, DIY filing
becomes risky. Even the new AIS system, while advanced, requires interpretation
that most taxpayers cannot handle correctly.”
CBDT Official (anonymous): “The government portal is user-friendly, but the department
advises taxpayers to verify all details thoroughly. Errors, even unintentional,
are treated seriously under the law.”
Impact & Significance
The issue impacts:
- Salaried
taxpayers with investments and freelance
income.
- Small
business owners who underreport expenses or
fail to claim GST credits.
- NRIs required to disclose foreign income and assets.
- First-time
earners filing without understanding
deductions.
Short-term impact:
Incorrect filing leads to delayed refunds and notices.
Long-term impact: Taxpayers flagged once may face closer monitoring in
future years.
Advantages & Disadvantages of
Self-Filing
Advantages:
- Saves
professional fees.
- Full
control over personal financial data.
- Faster
filing for simple salary cases.
- Government
portal is free and accessible 24/7.
Disadvantages:
- High
risk of errors in complex cases.
- Possible
penalties and scrutiny.
- Refund
delays if data mismatches occur.
- No
guidance on tax planning opportunities.
Case Studies & Real-Life
Examples
- Case
of Delayed Refund: A
salaried individual from Delhi reported only salary income but forgot to
declare FD interest. The mismatch between AIS and ITR led to a notice,
delaying a ₹25,000 refund for six months.
- Case
of Misreported Capital Gains:
An IT professional who actively traded shares filed his ITR-1 form instead
of ITR-3. The return was invalidated, and he had to refile with penalties.
- Case
of NRI Asset Disclosure:
An NRI failed to report a foreign bank account, thinking it was not
required since income wasn’t earned in India. The error resulted in a
hefty penalty under the Black Money Act.
Common Misunderstandings
- “I
only have salary income, so I don’t need to declare interest income.” (Incorrect — all income must be reported.)
- “If
TDS is deducted, I don’t need to file ITR.” (Wrong — ITR is mandatory above exemption limit or if
conditions apply.)
- “Small
errors can be ignored.”
(False — even small mismatches can trigger notices.)
- “Refunds
are automatic once filed.”
(Refunds are processed only if all data matches.)
Conclusion & Future Outlook
While filing ITR online without professional help may look
like a quick money-saving hack, the long-term risks often outweigh the
benefits. As India moves towards greater tax transparency through AI-driven
assessments and real-time monitoring of financial transactions, the margin for
error is shrinking rapidly.
Future reforms, such as pre-filled capital gains data
and integration with GST filings, may make filing simpler, but expert
intervention will remain valuable for complex cases. For most taxpayers,
investing in professional tax assistance is not an expense—it is a safeguard.
Expert Tip from Learn with Manika
If you are confident about your tax knowledge, you can file
ITR yourself—but always cross-check your return against Form 26AS, AIS, and
TIS before submitting. For complex cases, seek professional help instead of
risking penalties.