AY 2026-27 Income Tax Return Filing: 8 Major Errors That Could Trigger Tax Notices

On: June 22, 2026 8:18 PM

Income tax return filing for Assessment Year 2026-27 is underway, and tax experts are urging taxpayers to be extra cautious this year as the Income Tax Department strengthens AI-led scrutiny and automated compliance checks. While tools such as pre-filled forms and the Annual Information Statement (AIS) have simplified the process, stricter disclosure rules mean even small inconsistencies can attract notices.

With Forms 16 now being issued to salaried employees, professionals recommend completing return filing well before the deadline to avoid portal issues, rushed mistakes and possible penalties.

Tax Filing Season Begins Amid Stricter Compliance Checks

The Income Tax Department has intensified its focus on data-backed verification systems, making accurate reporting more important than ever before.

According to Sudhakar Sethuraman, the ITR forms for FY2025-26 introduce both simplified eligibility provisions and enhanced reporting obligations. He said the changes reflect the department’s growing emphasis on technology-driven compliance monitoring.

As of 17 June 2026, more than 42.6 lakh income tax returns had already been filed, while nearly 40.2 lakh had been verified through the official portal.

Important Tax Changes Introduced for FY2025-26

Taxpayers should carefully review the latest provisions before selecting a tax regime and filing returns.

Key Changes This Year

No tax liability under the new regime for income up to Rs.12 lakh
Salaried employees and pensioners effectively pay no tax up to Rs.12.75 lakh
Basic exemption limit under the new regime increased to Rs.4 lakh
Tax slabs under the new system have been relaxed
The old tax regime becomes beneficial mainly when deductions exceed Rs.8 lakh plus the standard deduction for taxpayers earning above Rs.25 lakh
HRA remains a major deciding factor between the old and new regimes
TDS on rent now applies when monthly rent exceeds Rs.50,000

Tax professionals said the majority of individual taxpayers have opted for the new regime this filing season.

1. Submitting Unsupported Deduction and Exemption Claims

Improper deduction claims remain one of the most common reasons for tax notices.

During 2025, the Income Tax Department issued automated alerts under its ‘nudge’ campaign, asking taxpayers to reassess FY2024-25 returns and revise incorrect filings before 31 December 2025.

Areas that received heightened scrutiny included:

House Rent Allowance claims
Donations without proof
Foreign asset disclosures
Property-related transactions

HRA Claims Under Watch

Mayank Mohanka said taxpayers paying rent to parents or relatives should maintain:

Valid rental agreements
Payment records
Supporting documents

He added that parents receiving rent must also disclose the rental income in their own returns.

Donation claims now require additional disclosures as well. Archit Gupta said taxpayers must provide transaction reference numbers and IFSC details for deductions under Section 80G, along with PAN details of political parties for claims under Section 80GGC.

2. Failing to Match AIS and Form 26AS Data

Experts advise taxpayers to start filing preparations by reconciling:

AIS
Form 26AS
Tax Information Statement (TIS)

Differences between these records and declared income are among the leading causes of automated notices.

Sethuraman said many taxpayers fail to report:

Savings account interest
Dividend income
Minor TDS entries

He warned that even small inconsistencies can be flagged by automated systems.

Data Errors Continue in AIS

Tax professionals also highlighted continuing issues with AIS data, including:

Duplicate entries
Delayed updates
Incorrect income classification
Timing mismatches

Shalini Jain explained that taxpayers often face delays in TDS and TCS credits, especially in cases involving multiple employers or high-value transactions.

She advised taxpayers to independently verify pre-filled data and preserve supporting documentation before submission.

3. Choosing the Incorrect ITR Form

Filing returns using the wrong ITR form can make the return defective and may lead to incomplete disclosures.

Mohanka said taxpayers frequently overlook mandatory reporting requirements connected to:

Donations
Political contributions
Tax regime selection
Financial disclosures

When ITR-1 Cannot Be Used

Taxpayers should avoid using ITR-1 if they:

Own overseas assets
Earn foreign income
Hold unlisted shares
Serve as directors in companies
Have equity long-term capital gains exceeding Rs.1.25 lakh

In such cases, forms like ITR-2 become mandatory.

4. Leaving Out Small Sources of Income

Experts stressed that taxpayers should disclose every source of income, regardless of amount.

Commonly omitted income includes:

Bank interest
Dividend income
Capital gains
Exempt income
Foreign earnings

Gupta noted that the department cross-verifies information using data from banks, TDS statements, credit card spending and other reporting systems.

Sethuraman added that AI-based matching systems now detect even minor omissions quickly.

5. Errors in Capital Gains Reporting

Capital gains reporting remains one of the most complicated areas for taxpayers.

Sethuraman said common mistakes include:

Wrong classification of short-term and long-term gains
Failure to separate transactions using regulatory cut-off dates
Ignoring carry-forward and set-off provisions

He highlighted 23 July 2024 as a crucial date because Budget 2024 revised the capital gains taxation framework across asset classes.

Traders Must Exercise Extra Care

Taxpayers involved in:

Futures and Options trading
Intra-day equity transactions
Buyback transactions

Must ensure accurate reporting and classification of income.

Mohanka advised taxpayers to reconcile broker records, mutual fund statements and AIS entries before filing.

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6. Ignoring Salary Earned From Previous Employers

Employees who changed jobs during FY2025-26 must combine salary details from all employers while filing returns.

Since each employer issues Form 16 separately, TDS calculations may not reflect total annual income accurately.

This can result in:

Excess exemption claims
Lower tax deduction

The responsibility for accurate reporting remains with the taxpayer.

7. Filing Returns After the Due Date

The deadline for filing ITR-1 and ITR-2 for most salaried taxpayers and pensioners is 31 July 2026.

Meanwhile, Budget 2026 introduced a separate due date of 31 August for taxpayers filing ITR-3 or ITR-4 in non-audit cases.

Penalties for Delayed Filing

Late filing can attract:

Rs.5,000 penalty
Rs.1,000 penalty where taxable income is below Rs.5 lakh

Tax experts warned that taxpayers missing the original due date may lose the option to choose the old tax regime if it proves more beneficial.

New Rules for F&O Traders

The updated ITR forms require Futures & Options traders to separately disclose:

Opening stock
Purchases
Direct expenses
Sales
Closing stock
F&O turnover and related income

Salaried individuals involved in such trading activities must use ITR-3.

8. Forgetting to Verify the Return

Many taxpayers submit returns online but fail to complete verification afterward.

Jain said returns must be verified within 30 days of filing; otherwise, they may be treated as invalid. Failure to verify may also affect eligibility for benefits under the old tax regime. Experts recommend completing verification immediately after filing to avoid complications.

Conclusion

With AI-driven scrutiny becoming more sophisticated, taxpayers can no longer afford careless mistakes while filing returns. Experts recommend early filing, careful reconciliation of financial records and accurate disclosure of every income source to ensure smooth processing and avoid unwanted notices.

Completing verification on time and selecting the correct tax regime and ITR form are equally important for hassle-free filing during AY 2026-27.