Summary: The article highlights 25 common yet avoidable mistakes taxpayers should avoid while filing Income Tax Returns (ITRs) for Assessment Year 2026-27. It explains that despite pre-filled returns, AIS, TIS, and enhanced validation by the Income Tax Department, taxpayers continue to make errors relating to personal details, selection of the correct ITR form, residential status, income reporting, deductions, TDS reconciliation, advance tax, and procedural compliance. Particular attention is drawn to changes for AY 2026-27, including revised due dates, expanded eligibility for ITR-1 and ITR-4, the extended revised return deadline up to 31 March 2027, and the continued applicability of the Income-tax Act, 1961 despite the commencement of the Income Tax Act, 2025. The article recommends reconciling Form 26AS, AIS and TIS, carefully choosing the appropriate tax regime, timely e-verification, retaining supporting documents, and seeking professional advice for complex cases to avoid notices, penalties, refund delays, and unnecessary litigation.
Introduction
Every assessment year, as the ITR filing season nears, our firm reviews hundreds of returns that have been self-filed by clients and also those prepared by other intermediaries ahead of each assessment year before they are filed. While the Income Tax Department has increased the use of pre-filled data, AIS (Annual Information Statement) and validation checks, year-after-year, we still find the same set of avoidable, practical errors.
For AY 2026-27 (FY 2025-26), there are nuances to the filing landscape. The staggered due date structure (31st July 2026 for ITR-1/ITR-2 filers, 31st August 2026 for ITR-3/ITR-4 non-audit cases, and 31st October/30th November 2026 for audit and transfer pricing cases respectively), expanded ITR-1/ITR-4 eligibility to include two house properties, a revised return deadline now extended to 31st March 2027, and the continued operation under the Income-tax Act, 1961 even though the Income Tax Act, 2025 has come into force from 1st April 2026. Mistakes made in this transition year could be more costly than normal as they could carry forward to the new compliance regime from AY 2027-28 onwards.
Based on our practical experience in handling ITR filings across salaried individuals, professionals, businesses, and corporates, we have compiled the following 25 crucial practical errors that taxpayers should be careful to avoid.
A. Errors Relating to Personal and Basic Information
1. Selecting the Wrong ITR Form
A very common and consequential error is filing income under the wrong ITR form for instance, a taxpayer with capital gains or two house properties using ITR-1 in years before the form’s scope was expanded, or a professional opting for presumptive taxation incorrectly filing ITR-2 instead of ITR-4. An incorrect form can render the return defective under Section 139(9), requiring rectification within the time allowed.
2. Mismatch in Name, Date of Birth or PAN
Even minor mismatches between the ITR and PAN/Aadhaar records (such as initials versus full name) can cause processing delays, failed e-verification, or rejection of refunds.
3. Selecting the Wrong Assessment Year
Particularly relevant this year taxpayers must select AY 2026-27 for income earned in FY 2025-26 and continue to apply provisions of the Income-tax Act, 1961, irrespective of the Income Tax Act, 2025 having come into force from 1st April 2026. Confusing “Tax Year 2026-27” (relevant only for income earned after 1st April 2026, to be filed in 2027) with AY 2026-27 is a frequently observed error this year.
4. Incorrect Residential Status
Taxpayers that have moved abroad or returned to India during the year often misclassify their residential status (Resident, Resident but Not Ordinarily Resident, or Non-Resident) without correctly applying the day-count tests under Section 6, leading to incorrect taxability of foreign income.
5. Not Updating Bank Account Details or Failing to Pre-Validate Bank Account
Refunds are credited only to a pre-validated bank account linked with PAN. We normally find returns where the bank account mentioned is either closed, not pre-validated on the e-filing portal, or not linked to the taxpayer’s PAN resulting in refund failures.
B. Errors Relating to Income Reporting
6. Not Reconciling Income with Form 26AS, AIS, and TIS
This remains the single most frequent error. Many taxpayers report only the income reflected in Form 16/16A without cross-verifying it against Form 26AS, the Annual Information Statement (AIS), and the Taxpayer Information Summary (TIS). Discrepancies particularly in interest income, dividend income, and mutual fund transactions are a leading trigger for notices under Section 143(1)(a).
7. Omitting Interest Income from Savings Bank Accounts, Fixed Deposits, and Recurring Deposits
Interest income, especially from multiple bank accounts and small fixed deposits where TDS was not deducted (because it was below the threshold), is frequently left unreported simply because no TDS certificate was received.
8. Ignoring Interest on Income Tax Refunds
Interest received on an income tax refund from an earlier year is taxable under “Income from Other Sources” in the year of receipt, but is very commonly overlooked since it does not appear in Form 16.
9. Incorrect Reporting of Capital Gains
With the changes to capital gains taxation, including the holding-period and rate structure under the Finance Act, taxpayers frequently apply outdated slab rates, omit grandfathering computations for pre-2018 equity investments, or fail to report each transaction (especially multiple mutual fund redemptions) individually with correct ISIN-wise cost and sale details as now required in the capital gains schedule.
10. Not Reporting Exempt Income
Many taxpayers assume that exempt income (such as PPF interest, agricultural income above the basic exemption threshold for rate purposes, or dividend income exempt in the hands of certain entities) need not be disclosed at all. Exempt income must still be reported in the “Exempt Income” schedule, even though no tax is payable on it.
11. Misreporting or Omitting Foreign Income and Foreign Assets
Resident taxpayers holding foreign bank accounts, foreign equity (including ESOPs of foreign parent companies), or overseas property are required to disclose these in Schedule FA, regardless of materiality. Non-disclosure can attract severe penalties under the Black Money Act, 2015, separate from any error under the Income-tax Act.
12. Incorrect Treatment of Income from House Property
Common errors include claiming municipal taxes not actually paid during the year, incorrect computation of Net Annual Value for a property kept vacant versus self-occupied, not reporting “deemed let out” income where the taxpayer owns more than two self-occupied properties, and relevant from this year incorrectly computing or omitting the new field for unrealised rent in ITR-1/ITR-4 now that the form permits reporting of up to two house properties.
13. Not Aggregating Income from All Employers in Case of Job Changes
Taxpayers who changed jobs during the year often file based on the Form 16 of only the last employer, omitting salary income (and TDS) from the previous employer, or double-claiming the basic exemption/standard deduction.
C. Errors Relating to Deductions and Exemptions
14. Claiming Deductions Not Permitted Under the Regime Chosen
Since the new tax regime is the default regime under the Income-tax Act, 1961 for AY 2026-27, taxpayers continuing to claim deductions such as Section 80C, 80D, or HRA under the new regime without realising these are not allowed (other than limited exceptions such as the employer’s NPS contribution) is a very common error, especially for first-time users of online filing utilities.
15. Failure to Validly Opt for the Old Regime Where Beneficial
Conversely, business and professional taxpayers (filing ITR-3/ITR-4) who want to opt for the old regime must furnish Form 10-IEA within the prescribed time. Missing this filing, or filing it after the due date, results in the new regime being applied by default even where the old regime would have been more beneficial.
16. Inflated or Unsupported Claims Under Section 80C, 80D, and 80G
We frequently encounter claims for life insurance premium, ELSS, or donations without adequate documentary support, or claims exceeding actual amounts paid. With increased data matching against AIS and third-party reporting (including from insurers and mutual funds), unsupported claims are increasingly being flagged for adjustment under Section 143(1)(a).
17. Incorrect HRA Claims Without Matching Rent Receipts/PAN of Landlord
HRA exemption claims without rent receipts, without the landlord’s PAN (mandatory where annual rent exceeds ₹1,00,000), or computed on an incorrect basis (using the wrong of the three statutory limits) remain a recurring error, particularly for salaried employees filing returns themselves.
18. Not Claiming the Section 87A Rebate Correctly
With the income threshold for the Section 87A rebate raised significantly under the new regime, several taxpayers either fail to claim the rebate they are legitimately entitled to, or incorrectly claim it against special-rate incomes (such as certain capital gains) to which the rebate does not apply, leading to under- or over-computation of tax liability.
D. Errors Relating to TDS, Advance Tax, and Compliance
19. Mismatch Between TDS Claimed and TDS Reflected in Form 26AS
Claiming TDS credit based on the TDS certificate (Form 16/16A) without verifying that the corresponding deductor has actually deposited and reported it in Form 26AS is one of the most common reasons for reduced refunds or demand notices.
20. Non-Payment or Under-Payment of Advance Tax
Professionals, business owners, and taxpayers with significant capital gains or other income not subject to TDS often overlook their advance tax obligations under Sections 208/234B/234C, resulting in avoidable interest liability that could have been planned for during the year itself.
21. Incorrect Quoting of Challan Details for Self-Assessment Tax Paid
Errors in quoting the BSR code, challan serial number, or date of payment of self-assessment tax in the ITR frequently cause a mismatch with the Income Tax Department’s records, leading to a demand notice despite the tax having actually been paid.
22. Ignoring the Tax Audit Applicability Threshold
Businesses and professionals close to the turnover/receipts thresholds under Section 44AB often fail to correctly evaluate applicability of tax audit (including the impact of cash transaction limits on the threshold), leading to either an unnecessary audit or, more seriously, a default in obtaining a mandatory audit.
E. Procedural and Filing-Stage Errors
23. Not E-Verifying the Return Within the Prescribed Time
An ITR is treated as not filed if it is not verified either electronically (Aadhaar OTP, net banking, etc.) or physically by sending the signed ITR-V to CPC Bengaluru within 30 days of filing. We continue to see returns filed correctly but never verified, resulting in the return being treated as invalid.
24. Confusing Revised Return, Belated Return, and Updated Return (ITR-U) Timelines
With the revised return deadline now extended to 31st March 2027 for AY 2026-27 (from the earlier 31st December), and the belated return deadline remaining at 31st December 2026, taxpayers frequently confuse the applicable timelines and the differing consequences (such as additional tax payable under Section 139(8A) for updated returns), leading to either missed opportunities for correction or unnecessary additional tax outflow.
25. Not Retaining Supporting Documentation After Filing
A purely practical but critical error: taxpayers file the return correctly but fail to retain supporting evidence like rent receipts, capital gains statements, donation receipts, foreign asset statements for the period during which the return can be selected for scrutiny or reassessment. When a notice arrives, often years later, the absence of contemporaneous documentation considerably weakens the taxpayer’s position even where the original claim was entirely valid.
Concluding Remarks
Most of the errors listed above are not technical or interpretational in nature they are practical, avoidable mistakes arising from haste, incomplete reconciliation, or unfamiliarity with the current year’s changes. With the Income Tax Department’s data analytics capabilities becoming increasingly sophisticated through AIS, TIS, and pre-filled returns, even small inconsistencies are now far more likely to be flagged than in earlier years.
We strongly recommend that taxpayers:
Reconcile Form 26AS, AIS, and TIS thoroughly before filing, and not rely solely on Form 16/16A;
Clearly evaluate the old versus new tax regime based on their specific facts before filing, and complete Form 10-IEA filing where applicable and required;
Retain all supporting documents for at least the period during which the return remains open for assessment or reassessment;
E-verify the return immediately after filing; and
Engage a qualified Chartered Accountant for returns involving capital gains, foreign assets, business income, or any element of complexity, rather than relying solely on automated filing utilities.
Careful attention to these practical aspects can save taxpayers from avoidable notices, interest, penalties, and the time-cost of subsequent rectification proceedings.
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Disclaimer: This article has been prepared for general informational purposes based on the provisions applicable for Assessment Year 2026-27 and does not constitute professional advice. Readers are advised to consult their tax advisor or our firm for guidance specific to their facts before acting on any of the points discussed above
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