8 big mistakes in filing ITR-2: Refund may get stuck, notice may also come

Common Mistakes in Filing ITR-2: What You Need to Know

ITR-2 is the go-to return form for salaried individuals, non-resident individuals (NRIs), and high-net-worth taxpayers who have numerous sources of income, such as dividend earnings, foreign income, or capital gains. However, many taxpayers make common mistakes while submitting their Income Tax Return Form 2. These errors can range from failing to record foreign assets to incorrect capital gains reporting and underreporting earnings from mutual funds. Such mistakes may delay tax refund credits or trigger income tax notices, and even seasoned tax and investment experts can fall prey to these errors.

Most Common Mistakes in ITR-2

1. Wrong Capital Gains Reporting:
   
   One of the most frequent errors occurs in reporting capital gains. Taxpayers often misclassify short-term and long-term gains or miss share-wise details in Schedule 112A. According to Abhishek Soni, CEO & Co-founder of Tax2win, this error is prevalent and can lead to significant discrepancies.
2. Not Reporting Foreign Assets:
   
   Resident taxpayers frequently skip disclosing overseas accounts or assets in Schedule FA, which is mandatory. “Last year, the Income Tax Department noted almost 15–20% mismatches in ITRs based on incorrect capital gains reporting, often from selling shares or properties,” remarked Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Pvt. Ltd.
3. Incorrect Residential Status:
   
   Another common error is the incorrect claim of residential status—especially for NRIs or returning Indians. Choosing the wrong status (‘resident’, ‘non-resident’, or ‘not ordinarily resident’) can lead to incorrect tax calculations and missed forms like Form 67 for foreign tax credit, as highlighted by Soni.
4. Skipping Schedule AL (Assets and Liabilities):
   
   Taxpayers are required to report immovable properties, vehicles, jewellery, bank balances, shares, and more. “Failure to report foreign assets like overseas bank accounts or ESOPs can lead to severe penalties,” warned Gaurav Singh Parmar, Associate Director at Fincorpit Consulting.
5. Mismatching Dividend Income and Schedules:
   
   It is also common for taxpayers to forget to report dividend income under “Income from Other Sources,” leading to discrepancies.
6. Mismatch in Income and AIS/26AS:
   
   Underreporting or overreporting due to misreading Form 26AS or AIS can create issues. Taxpayers must download both Form 26AS and AIS from the income tax portal to avoid mismatches.
7. Incorrect Reporting of Carry-Forward Losses:
   
   Failing to fill out Schedule CFL (Carry Forward of Losses) or Schedule BFLA (Set off of Losses) can hinder potential tax benefits. Taxpayers must file their return before the due date to carry forward capital losses effectively.
8. Address Change:
   
   If you have changed jobs or moved cities— for instance, from Delhi to Mumbai—don’t forget to update your address and employer details accurately in your return. Mumbai-based investment and tax expert Balwant Jain cautions against overlooking this important aspect.

Conclusion

Capital gains require careful classification, and mutual fund transactions should be verified by requesting detailed statements. Cross-check everything with the AIS (Annual Information Statement) to avoid mismatches. By being aware of these common pitfalls, taxpayers can ensure a smoother filing process and avoid unnecessary complications with their ITR-2 submissions.