Filed wrong ITR form? Consequences & how to fix it

Business Standard

10-07-2025

With the ITR filing season in full swing, one mistake that many taxpayers make is selecting a wrong Income Tax Return (ITR) form. Experts warn this error can lead to delays, notices from the tax department, and even penalties in some cases. But there are remedies available, if you act in time.
Why the right ITR form matters
'Filing an incorrect ITR form can render the return defective under Section 139(9) of the Income Tax Act,' says Sandeep Bhalla, partner at Dhruva Advisors.
For example, using ITR-2 instead of ITR-3 for business income could result in income remaining unreported, triggering underreporting penalties. In some cases, the return may simply be treated as invalid unless corrected within the timeline.
The Centralised Processing Centre (CPC) flags such returns and issues a notice.
'The taxpayer then gets 15 days to file a corrected return. Failing to do so means the original return is treated as not filed at all,' warns Vivek Jalan, partner at Tax Connect Advisory Services LLP.
Financial and legal risks
The fallout of filing the wrong form isn't limited to administrative inconvenience.
'It can delay refunds, disallow deductions like 80C or HRA, and even attract late filing fees of up to Rs 5,000,' explains Shefali Mundra, chartered accountant and tax expert at ClearTax.
If the error leads to underreporting income, penalties under Section 270A may apply 50 per cent of underreported income or 200 per cent in cases of misreporting.
'Incorrect reporting also increases the chances of scrutiny, especially if details don't match AIS, TIS, or Form 26AS,' adds Niyati Shah, chartered accountant, Vertical Head – Personal Tax at 1 Finance.
How to fix it?
Taxpayers can file a revised return under Section 139(5) by December 31 of the relevant assessment year, as long as the original return was filed on time. 'If this window has lapsed, the Updated Return (ITR-U) under Section 139(8A) allows corrections within 48 months,' Bhalla points out.
Tips to avoid mistakes
Experts recommend understanding income sources thoroughly before selecting a form.
'A common mistake is assuming ITR-1 applies to all salaried individuals, even those with multiple properties or capital gains,' warns Shah. Taxpayers should verify pre-filled data and use tools that recommend the correct form or consult professionals when in doubt.