With the ITR-1 filing deadline extended to September 15, 2025, for non-audit cases, taxpayers have been urged to be careful to avoid ineligible deduction claims.
Common deductions include Section 80C for investments such as Public Provident Fund (PPF) and Equity-Linked Savings Schemes (ELSS), 80D for health insurance, 80E for education loan interest, and 80TTA/TTB for interest on savings accounts.
What is the penalty for making ineligible claims?
The new ITR norms signal a “zero-tolerance” approach to false claims. Under Section 270A of the Income Tax Act, 1961, individuals found misreporting income or claiming deductions without proper grounds could face penalties up to 200% of the tax payable, along with annual interest. In severe cases, prosecution under Section 276C is also a possibility.
Taxpayers should make only eligible claims as any discrepancy could lead to significant penalties and even legal action.
Tips to avoid ineligible claims
To ensure a smooth Income Tax Return (ITR) filing experience this season and avoid the wrath of the tax department, it’s crucial for taxpayers to make only legitimate deduction claims. With increased scrutiny and the new tax regime as the default, here are key tips to help you file accurately and avoid ineligible claims for Assessment Year (AY) 2025-26:
- Choose the right tax regime
The new tax regime is now the default, offering lower rates but disallowing most deductions like 80C, 80D, HRA, and LTA.
The old regime allows these but has higher rates.
Tips:
- Use online calculators to compare tax liability under both.
- Salaried individuals can opt out via ITR form; business/professionals must file Form 10-IEA.
- Ensure your ITR reflects the regime shared with your employer.
- Keep proper documentation
Back up claims with valid proof to avoid scrutiny.
Examples:
- 80C: PPF passbooks, ELSS statements, tuition fee receipts.
- 80D: Insurance payment receipts.
- HRA: Rent agreement, landlord PAN (if rent > ₹1 lakh).
- Home Loan: Interest/principal certificates.
- Donations: Receipts from eligible institutions (non-cash if > ₹2,000).
- 80E: Interest certificate on education loans.
- Reconcile with AIS & Form 26AS
Match declared income/deductions with:
- AIS: Shows interest, dividends, property/mutual fund transactions.
- 26AS: Lists TDS, advance/self-assessment tax.
- Discrepancies may trigger notices—raise feedback or contact deductors for correction.
- Avoid ineligible claims
- Don’t claim 80C, HRA, etc. under new regime.
- Avoid personal expenses, inflated claims, or cash-mode deductions where not allowed.
- Verify your ITR
- E-verify via Aadhaar OTP, Net Banking, or pre-validated accounts.
- Or, send signed ITR-V to CPC Bengaluru within 30 days.
- Unverified returns are treated as not filed.
