15 Common Mistakes to Avoid While Filing ITR for FY 2025-26 (AY 2026-27)

Taxpayers should file their Income Tax Returns (ITR) in a timely and accurate manner in order to avoid adverse consequences like income tax notices, refund delay, potential additional tax liability and penalties. Common mistakes include ignoring mismatches between data as per income tax records and the return filed, claiming ineligible deductions, or eligible deductions under the wrong category, eliminating meager income like interest and dividend, and so on. 

1. Income Tax Notice Discrepancy

Taxpayers have been receiving income tax notices lately, especially related to deductions and exemptions claimed. The Income Tax Department increasingly uses artificial intelligence and advanced data analytics to match every deduction with the source information. Deduction claimed under the wrong section, ineligible deduction is claimed by entering it in other eligible fields, claiming of deduction or exemption without adequate sources, can lead to income tax notices. When the assessee is not able to prove the genuineness of the deductions claimed, this may lead to severe consequences including penalties.

2. Selecting the Incorrect Form

Selecting the correct ITR form ensures smooth processing by the Income Tax Department. Filing the wrong form may lead to a defect notice.
Example:

ITR-1: Salaried, income < Rs. 50L, no capital gains

ITR-3: Income from business or profession

Using an e-filing platform like ClearTax, you do not have to worry about choosing the correct form, as the software does this automatically.

3. Quoting the Wrong Assessment Year

While filing the returns, one must ensure that the correct Assessment Year is provided. For FY 2025-26, the correct corresponding AY is 2026-27. Mentioning the wrong AY increases the chances of double taxation and attracts unnecessary penalties.

4. Furnishing Incorrect Personal Information

Personal details, like name, address, mail ID, phone number, PAN, date of birth, etc., must be accurately mentioned in the return of income. You need to ensure that the details match those given in your PAN. 

Further, if you are looking at claiming a refund, make sure your bank particulars to which you intend your refund to be credited, like account number, IFSC code, etc., are accurately mentioned to receive your refund on time and without hassles. Incorrect bank details will enable the system to flag a bank account error. 

5. Not Disclosing All the Sources of Income

If there is any income from any source other than the primary source of income, it must be disclosed. Taxpayers have to disclose income from all sources including savings account interest, fixed deposit interest, capital gains, rental income from house property, income from short-term capital gains and any other source. The income must be disclosed irrespective of being taxable or exempt. Many taxpayers, out of ignorance, tend to miss out on giving details of exempt income. 

Example: Although long term capital gains are exempt from tax up to Rs.1.25 lakh in case of equity shares or equity-oriented mutual funds, the details of the gains have to be mentioned in the schedule applicable for capital gains mandatorily.

6. Entering the Correct Details Manually

The ITR forms carry several rows and columns that need to be filled out at the time of filing one’s income tax returns. The details have to be entered in a particular format, which if not done correctly can lead to errors in the returns. For example, dates must only be entered in the DD/MM/YYYY format. If the date is entered in any other format, the returns would be incorrect.

7. Failure to Reconcile Income and TDS With Form 26AS 

It is important to check Form 26AS and AIS before filing the ITR. Form 26AS includes details of Tax Deducted at Source (TDS), Tax Collected at Source (TCS), High-value investments made, advance tax, self-assessment tax, etc. Your employer may have deducted taxes at source on your salary. A salaried person must cross-verify the details with Form 16 issued by the employer with Form 26AS. In cases where the TDS is not reflected in your Form 26AS, you will not get a credit for tax deductions not mentioned in Form 26AS. 

The taxpayer must ensure that the information in Form 26AS is up-to-date and correct. Mismatches as between your Form 26AS and Form 16 or TDS certificates may lead to less refund or more taxes payable.

8. Failure to Reconcile Income and Investments With AIS and TIS

AIS (Annual Information Statement) is an extension of Form 26AS consisting of more comprehensive details like GST turnover, purchase and sale of securities, foreign remittances, etc. TIS (Taxpayer Information Summary) consists of aggregated information and summary details of the taxpayer. The reported value, as shown in TIS is the value reported by various reporting entities like banks concerning the assessee. The derived value is the updated value after considering the assessee’s feedback. This value will be prefilled in the ITR. It is crucial to make sure that this derived value is the actual value of the Income and Investment of the taxpayer.

9. Form 16 from Two or More Employers

Whenever a taxpayer changes jobs, they end up with different Form 16s from each employer when filing their tax returns. Filing returns with multiple Form 16s can be tricky, and taxpayers are often not sure how to do it. In such cases, taxpayers have to aggregate their incomes from both employers under their income from salary.

10. HRA not Given by Employer

If an individual doesn’t submit the rent receipts with the company HR, he or she won’t be able to get house rent allowance. Often, taxpayers are not aware that they need to have their landlord’s PAN to avail the HRA benefit. Taxpayers can calculate and claim HRA exemption at the time of filing their income tax returns.

11. Non-Availing of the Available Deductions

Certain deductions are available to taxpayers regarding income, expenditures, and donations. These deductions help taxpayers reduce their tax liability by reducing their total tax liability. However, figuring out how much can be claimed from what source is tricky. The ClearTax portal helps taxpayers claim the correct amount of deductions.

12. Not Paying Advance Tax

Paying your taxes within due dates is always advisable to avoid paying interest and penalties. Advance Taxes should be paid in four installments: June 15th, September 15th, December 15th, and March 15th. Non-payment or short payment of advance tax attracts interest @ 1% on the unpaid amount until such shortfall exists. 

13. Failure to E-Verify ITR On Time

After successfully e-filing your income tax return, e-verify your ITR via Net banking, Aadhaar Card, or the EVC process on your mobile number and email within 30 days of the e-filing of a tax return. For some reason, if you cannot e-verify your return, you can sign and send the ITR-V to the CPC via ordinary or speed post only within 30 days of the e-filing of a tax return.

14. Not Disclosing Schedule AL

If the net income exceeds Rs.1 crore, you must file Schedule AL. This Schedule is to be filled by individuals and HUFs giving details of properties held by the assessee and the corresponding liabilities.

15. Not Disclosing Foreign Assets & Liability Details 

As per the Income Tax Act of 1961, residents and ordinarily resident Indians should report their foreign income, assets, accounts, and shares in the schedule FA in ITR in a given format, irrespective of whether the income is taxable in India or not.

Schedule Foreign Assets (FA) is a schedule in the ITR wherein you are required to furnish the details of foreign assets, such as foreign shares, foreign company mutual funds, and directly employee stock options (ESOPs) of foreign companies.