Early filing of Income Tax Return (ITR) seems like a wise decision for many taxpayers. One will feel responsible and calm. All tasks are completed on time and there is no last minute pressure. However, premature filing may sometimes lead to more complications.
Many taxpayers file their ITR in April-May every year. They get notices later, delayed refunds or wrong tax information. All these complications arise simply because the data related to taxation is not up-to-date yet. It is thus necessary to be aware of all the implications of filing ITR prematurely.
Why Filing ITR Too Early Can Become a Problem?
Several financial documents determine your ITR. The updating process takes some time. The government will make errors if you submit your ITR before receiving the necessary documents. The following are the possible risks faced by taxpayers.
1. AIS and Form 26AS May Not Be Fully Updated
Your tax related transactions are recorded in AIS (Annual Information Statement) and Form 26AS.
These are:
- TDS deduction
- Interest income
- Stock market transactions
- Mutual fund transactions
- Large purchase transactions
- Bank interest
It is updated by banks, your employer, and financial institutions at different points in time. If you submit your returns earlier, then some details will not appear.
Example
If your bank updates FD interest in June while you file your returns in April, then your ITR shows less income. If the Income Tax department discovers the mistake later on,
It can result in:
- Tax notices
- Tax demand
- Penalty or interest
2. TDS Details May Not Reflect Properly
TDS is deducted by employers/companies after the salaries/payment have been processed. In certain cases, they may amend TDS returns. Your refunds may be held back due to errors in your Form 26AS regarding TDS.
Problems and Their Implications
| Problem | Consequence |
|---|---|
| Missing TDS entry | Lower refund |
| Incorrect PAN details | Mismatch in tax |
| Amended TDS return | Amend ITR |
Getting proper TDS entries will mitigate such problems.
3. Chances of Receiving Tax Notices Increase
Now, the Income Tax Department is using sophisticated data matching techniques.
Your ITR is being compared to:
- AIS,
- Form 26AS,
- Bank details,
- Investments, and
- GST details.
Mismatches by even a single penny will generate automatic notices. Those who file their returns at an early stage might not have updated information. Therefore, notices may be received by them after some time.
4. You May Need to File a Revised Return
Most of the people who tend to file their returns prematurely find out that there is an error in the same. Thus, they end up filing an amended return. Amended returns can bring a lot of complications and problems.
Causes of Amended Returns:
- Omissions of interest earned from the banks
- Omission of capital gains
- Miscalculation of deduction claims
- Calculated Tax Deduction at Source incorrectly
- Changes made in employers’ information
5. Refunds Can Get Delayed
People tend to submit early returns to ensure faster refunds; however, incorrect or incomplete information could lead to delays in the refund process.
This could be the case if:
- TDS mismatch arises
- There is income inconsistency
- Later information on AIS changes
Therefore, submitting your return early does not necessarily mean that you will get faster refunds.
Ideal Time to File ITR
Also, you do not have to wait till the very last week. The best thing to do is balanced filing.
Ideal Time for Most Salaried Taxpayers:
| Period | Recommendation |
|---|---|
| April–May | Too early in many cases |
| June–July | Safer and ideal |
| Last week before deadline | Risky because of rush |
By then, most financial information will be updated, enabling you to prepare a more accurate return.
What You Should Check Before Filing?
Ensure that you have checked these documents before filing your ITR:
Checklist
- Form 16 issued by employer
- AIS document
- Form 26 AS
- Interest earned from banks
- Statement of capital gains
- Mutual fund transactions
- Home loan declaration
- Documents for deductions
Please make sure to check every number carefully. Ten extra minutes might save you months of hard work.
Smart Tax Filing Is Better Than Fast Tax Filing
It is okay to file ITR early. However, filing without all the necessary details is very dangerous. It is much better to be accurate than to be speedy.
With careful review, you will have less:
- Notices
- Time for refunds to come in
- Tax demand
- Hassle in the future
Conclusion
It might seem like a good idea to file the ITR early, but not having all the information required for taxes could cause you troubles. Lack of updates in AIS, incorrect data in TDS, or any other errors related to your tax return form could cause you trouble later. It’s always better to take time to prepare an error-free ITR.
FAQs
Q1. Will early filing of ITR be beneficial?
No, because critical tax information could still not have been received in AIS or Form 26AS.
Q2. Is there any possibility of notice regarding any kind of mismatch even after timely filing?
Yes, because if the income declared by you on filing is not matched with the government database, then a notice will be issued.
Q3. Does early filing guarantee fast refunds?
No, incorrect filing and inaccurate information will make your refund process take a lot of time.
Q4. Is correction of errors in returns possible?
Yes, one can file revised ITRs before their due dates; however, making no mistake initially is preferable.
Q5. When is ITR preferable to be filed by salaried individuals?
Salaried individuals should preferably file their ITR in June-July once all relevant Forms are verified.