With the July 31, 2025, deadline for filing your Income Tax Return (ITR) just days away, the focus is on getting it done on time. But filing in a hurry can lead to simple mistakes that act as red flags for the Income Tax Department. While a full-blown “audit” is rare for most individuals, your return can be automatically flagged by computer systems for “scrutiny” or a notice can be issued. For senior citizens who value peace of mind, avoiding these red flags is crucial. This guide will highlight the top 5 triggers to avoid, ensuring your return is clean, compliant, and filed with confidence.
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Red Flag #1: Mismatch Between Your ITR and Your AIS / Form 26AS
Why it’s a problem: This is the single biggest reason for automated notices. The Income Tax Department has a powerful tool called the Annual Information Statement (AIS), which collects your financial data from banks, mutual fund houses, property registrars, etc. If you declare ₹40,000 in interest income, but your AIS shows your banks reported ₹55,000 in interest paid to you, the system’s algorithm will immediately flag this discrepancy.
The Safe Path: Treat your AIS as your guide. Before you start filing, download both your Form 26AS (for TDS details) and your AIS from the e-filing portal. Meticulously compare the income and TDS details shown there with your own records. Ensure every single item of income reported in your AIS is accounted for in your ITR. Honesty and consistency are your best defense.
Red Flag #2: Claiming Unusually High Deductions or Refunds
Why it’s a problem: While you should claim every deduction you’re entitled to, claiming very high amounts, especially if they are inconsistent with your past filing history, can trigger a review. For example, suddenly claiming the maximum possible amount under multiple deduction sections without a corresponding change in your financial situation might look suspicious to the system.
The Safe Path: Claim only what you can prove with documents. For every deduction you claim under the Old Tax Regime (like Section 80D for medical expenses or 80G for donations), ensure you have a valid receipt, bill, or certificate stored safely. Don’t be tempted to inflate numbers to get a bigger refund. A legitimate, well-documented claim is always safe.
Red Flag #3: Not Reporting High-Value Transactions
Why it’s a problem: The government tracks high-value transactions through the Statement of Financial Transactions (SFT). If you sold a property, made a large cash deposit (typically above ₹10 Lakh in a year), or made significant investments in shares or mutual funds, the tax department knows about it. Failing to file an ITR or not mentioning these transactions in your return is a major red flag.
The Safe Path: Transparency is key. If you have undertaken any such transactions, it is crucial to file your ITR and report them correctly. For instance, if you sold a property, report the capital gain and then claim the appropriate exemption (like under Section 54). Hiding a transaction is far riskier than reporting it and explaining it correctly.
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Red Flag #4: Showing High Exempt Income Without Justification
Why it’s a problem: Declaring a large amount of income as “exempt from tax,” such as agricultural income or a large gift, without proper justification can lead to questions. The tax officer may want to verify the genuineness of the claim.
The Safe Path: Maintain proper records. For agricultural income, keep land records and proof of agricultural activity. For gifts, remember that gifts from non-relatives are taxable if the aggregate amount exceeds ₹50,000 in a year. Ensure any large gift you claim as exempt is from a “relative” as defined under the Income Tax Act.
Red Flag #5: Filing a Defective or Incomplete Return
Why it’s a problem: This is a simple but critical error. Rushing can lead you to choose the wrong ITR form (e.g., using ITR-1 when you have capital gains from shares, which requires ITR-2). Even worse is submitting the return but forgetting to verify it.
The Safe Path: Double-check that you are using the correct ITR form for your income sources. Before hitting submit, preview your entire return. Most importantly, as soon as you file, complete the e-verification process, preferably with an Aadhaar OTP. An unverified return is considered an invalid return in the eyes of the law.
Already Filed and Spotted a Mistake? Use a Revised Return!
If you’ve already filed and realized you made one of these mistakes, don’t panic. The Income Tax Act allows you to file a Revised Return to correct any error or omission in your original filing. It is always better to proactively correct a mistake yourself than to wait for the tax department to find it.
File Clean, Sleep Well
With the July 31st deadline looming, your goal should be to file a return that is accurate, transparent, and complete. Avoiding scrutiny isn’t about hiding information; it’s about presenting it correctly and honestly. Take a final look at your ITR through the lens of these red flags. A clean, compliant filing is your ticket to a stress-free financial year.
Disclaimer: This article is for informational purposes only and is not a substitute for professional tax advice. The criteria for tax scrutiny can be complex and are at the discretion of the Income Tax Department. For any concerns, please consult a qualified Chartered Accountant.
