About the Authors: This guide was prepared by the Chartered Accountancy (CA) and tax advisory team at Rudra Capital, leveraging years of hands-on experience handling income tax filing, scrutinies, and compliance matters for individuals and corporate clients across Delhi NCR.
Compliance Framework: All statutory references are updated to the Income-tax Act, 1961 and the Income-tax Rules, fully incorporating the latest provisions, electronic filing mandates, and automated data-matching parameters applicable for Assessment Year (AY) 2026-27.
Last Updated: May 2026
The Income Tax Department knows more about your finances than most people realise.
Your bank reports interest income. Your broker reports every equity and mutual fund transaction. Your employer reports your full salary. Property registrars report real estate deals. Crypto exchanges report transaction volumes. All of it flows into your Annual Information Statement (AIS) — and the department’s AI systems compare it against your filed ITR automatically.
For AY 2026-27, this data infrastructure is more comprehensive and more aggressively enforced than in any previous year. The ITR filing deadline for most individuals is July 31, 2026. Filing incorrectly is significantly worse than filing late — a wrong return can trigger a notice, a demand, an interest charge, and in serious cases, a scrutiny assessment.
Here are the 12 most common — and most expensive — mistakes taxpayers make.
Why AY 2026-27 Is a High-Risk Filing Year
Three things make AY 2026-27 different from previous years:
First, this is the first ITR season under the new Income Tax Act 2025. While the substantive law is largely unchanged, form numbers, section references, and some reporting formats have been updated. Taxpayers using old references or outdated software will make errors they do not even notice.
Second, the AIS now captures data from more sources than ever — including mutual fund transactions, insurance policy surrenders, crypto transactions reported by exchanges, and property-related payments. The volume of cross-checked data has increased substantially.
Third, the CBDT has explicitly signalled increased focus on high-value transaction mismatches and unreported foreign assets in FY 2026-27 processing. Scrutiny selections are increasingly AI-driven and less random than in earlier years.
The good news: every single mistake on this list is avoidable with a careful review before filing.
Mistake 1 – Filing the Wrong ITR Form
Why it happens: ITR form eligibility changes slightly every year, and many taxpayers carry forward last year’s habit without checking updated eligibility.
What goes wrong: If you file an ITR form you are not eligible for, your return is marked “defective” under Section 139(9). You receive a defect notice and must refile in the correct form within 15 days — a tight window that many people miss.
AY 2026-27 eligibility quick reference:
- ITR-1 (Sahaj): Salaried, pension, one house property, income from other sources up to ₹50 lakh, LTCG from listed securities up to ₹1.25 lakh. NOT eligible if you are a director of a company, hold unlisted shares, have foreign income, or have more than one house property.
- ITR-2: Salaried with capital gains above ₹1.25 lakh, multiple house properties, foreign assets, director/unlisted shareholder.
- ITR-3: Any person with income from business or profession (with books of accounts).
- ITR-4 (Sugam): Presumptive income only — Section 44AD (business, turnover ≤ ₹3 crore for digital receipts), 44ADA (professionals, gross receipts ≤ ₹75 lakh), 44AE. NOT eligible if turnover/gross receipts exceed these limits.
Fix: Check the ITR form instructions on incometax.gov.in before filing. When in doubt, a CA can confirm eligibility in minutes.
Mistake 2 – Ignoring Your AIS Before Filing
Why it happens: Most taxpayers go directly from Form 16 to the ITR portal without ever opening their AIS.
What goes wrong: Your AIS may show income that is not in your Form 16 — FD interest, dividends, mutual fund redemptions, property transactions. If you file without reporting these, the system automatically detects the mismatch during processing and raises a demand under Section 143(1).
What to do: Log in to incometax.gov.in → Annual Information Statement → download your AIS for FY 2025-26. Review every line item. For each entry, ask: Is this taxable? Is the amount correct? Have I reported it in my ITR?
If AIS shows an incorrect entry (wrong amount, duplicate transaction, already taxed amount), submit a feedback on the AIS portal before filing. Then file your ITR with correct figures. Keep a written record of why your ITR differs from AIS — you may need it if a notice arrives.
This is the single most important step in preventing a 143(1) notice. Do not skip it.
Mistake 3 – Not Reporting All Sources of Income
Why it happens: Taxpayers assume that if TDS was deducted, the income is already accounted for. Or they think small amounts do not need to be reported.
There is no threshold below which income goes unreported. Every rupee of income from every source must appear in your ITR, regardless of whether TDS was deducted.
Commonly missed income sources:
- Savings bank interest — Taxable above ₹10,000 (Section 80TTA deduction available for the first ₹10,000), but the gross interest must still be reported under “Income from Other Sources”
- Fixed deposit interest — Taxable at slab rates. Many people report only the TDS and not the gross interest
- Dividend income — Fully taxable at slab rates since FY 2020-21. Both equity and mutual fund dividends must be reported
- Recurring deposit maturity — The interest component is taxable even if TDS was not deducted
- Freelance or consulting income — Even if received in a personal account without formal invoices
- Rental income — Even from property rented to a family member for a nominal amount
- Interest from NSC, KVP, bonds — Accrual-based reporting required even before maturity in some cases
Fix: Use your AIS and bank statements together to identify every income stream.
Mistake 4 – Claiming Deductions Without Supporting Documents
Why it happens: The ITR portal does not ask for proof at the time of filing. Taxpayers claim deductions they plan to “manage” later if asked.
What goes wrong: Deductions claimed without supporting documents are disallowed during scrutiny. This results in added back income, tax demand, interest from the original due date, and potentially a penalty under Section 270A for under-reporting.
Deductions that must have hard documentation before you claim them:
- Section 80C: LIC premium receipt, PPF passbook, ELSS statement, home loan principal in bank certificate, NSC certificate
- Section 80D: Health insurance premium receipt; medical bills for senior citizens claiming without insurance
- Home loan interest (Section 24b): Interest certificate from bank for the exact amount claimed
- HRA: Rent receipts signed by landlord, landlord’s PAN (mandatory for rent above ₹1 lakh/year), rental agreement
- Donations (Section 80G): Official receipt from the donee institution with 80G registration number
Fix: Gather all documents before filing. If a receipt is missing, contact the institution immediately — do not file a return claiming a deduction you cannot prove.
Mistake 5 – Wrong Capital Gains Reporting After July 23 2024 Rate Change
Why it happens: The Union Budget 2024 changed capital gains tax rates effective July 23, 2024 — mid-financial year. Taxpayers and even some CA practitioners missed the split-period reporting requirement for AY 2025-26, and the same confusion continues for AY 2026-27.
Updated capital gains rates for FY 2025-26 (AY 2026-27):
- STCG on listed equity and equity-oriented mutual funds (Section 111A): 20% flat (increased from 15%)
- LTCG on listed equity and equity-oriented mutual funds (Section 112A): 12.5% on gains above ₹1.25 lakh (increased from 10% on gains above ₹1 lakh; indexation removed)
- LTCG on debt mutual funds: Taxed at slab rates (no special rate; this change came from April 2023)
- STCG on debt mutual funds: Taxed at slab rates
- LTCG on property, gold, unlisted shares: 12.5% without indexation (for transfers from July 23, 2024) OR 20% with indexation (for transfers before July 23, 2024)
Common mistake: Many people do not report the gross sales proceeds — they report only the net gain. Schedule CG requires both the sale price and cost of acquisition. Missing either one triggers a data deficiency flag.
Fix: Download your capital gains report from your broker platform (Zerodha, Groww, Angel One all provide annual capital gains statements). Enter amounts in Schedule CG exactly as reported.
Mistake 6 – Not Disclosing Crypto and Virtual Digital Asset (VDA) Income
Why it happens: Many crypto investors still believe that untransacted holdings (hodling) do not need to be reported. Or that losses offset gains. Neither is accurate.
The rules for AY 2026-27:
- All profits from VDA (Bitcoin, Ethereum, NFTs, any token) are taxed at 30% flat plus 4% cess
- No deductions are allowed except the cost of acquisition
- Losses from one VDA cannot offset gains from another — each coin is taxed separately
- VDA received as income (salary, gift, airdrop, staking reward) is taxable at full slab rates as income from other sources on the date of receipt
- TDS at 1% under Section 194S applies on transfers above ₹10,000 (or ₹50,000 for specified persons) — if you traded peer-to-peer, check whether TDS was properly handled
Your crypto exchange (CoinDCX, WazirX, CoinSwitch, Zebpay) is required to report your transactions to the income tax department. This data appears in your AIS under the VDA category.
Fix: Download your full transaction history from every exchange and calculate profit on each transaction. Report in Schedule VDA of your ITR. Do not leave this blank if you have traded at all during the year.
Mistake 7 – Not E-Verifying the Return Within 30 Days
Why it happens: Filing and e-verification feel like the same step, but they are not. After clicking “Submit,” the return is filed. E-verification is a separate step.
What goes wrong: A return that is not e-verified within 30 days of filing is treated as if it was never filed. You do not get a refund. You are treated as a non-filer for all assessment purposes. The window for revised returns closes from the unverified original filing date regardless.
E-verification methods:
- Aadhaar OTP (fastest — instant)
- Net banking EVC (Electronic Verification Code)
- Bank account EVC via pre-validated bank account
- Demat account EVC
- DSC (for companies and audit cases)
- Physical ITR-V to CPC Bengaluru by post (only if none of the above work — takes 30 days and is risky near deadlines)
Fix: E-verify immediately after filing — do not close the browser before completing this step. The Aadhaar OTP option takes under 2 minutes.
Mistake 8 – Mismatch Between Form 26AS TDS and What You Filed
Why it happens: Employers and banks sometimes deposit TDS with incorrect PAN, wrong assessment year, or wrong section code. Taxpayers copy TDS amounts from their bank statements without cross-checking Form 26AS.
What goes wrong: You can only claim TDS credit that appears in your Form 26AS as actually deposited with the government. If your Form 16 shows ₹50,000 TDS deducted but only ₹40,000 appears in Form 26AS, you can only claim ₹40,000 as credit. Claiming the higher figure results in a demand notice for the difference.
Fix: Download Form 26AS from TRACES (traces.gov.in) before filing. Cross-check every TDS entry against your Form 16, salary slips, and bank certificates. For discrepancies, approach the deductor (employer/bank) to file a correction statement before the deadline.
Mistake 9 – Missing Schedule AL for Income Above ₹50 Lakh
Why it happens: Taxpayers above the ₹50 lakh income threshold do not always realise that the ITR requires them to disclose their assets and liabilities.
What is required: Schedule AL (Assets and Liabilities) must be filed by any individual or HUF whose total income exceeds ₹50 lakh. It requires disclosure of:
- Immovable property (land, buildings) with cost of acquisition
- Financial assets (bank balances, shares, mutual funds, bonds, NSC/KVP)
- Movable assets (jewellery, vehicles, art)
- Liabilities (loans outstanding)
Omitting Schedule AL is not a minor oversight — the IT department uses it to cross-check unexplained wealth cases and high-value transaction notices.
Mistake 10 – Filing ITR-4 When You Are Not Eligible for Presumptive Taxation
The presumptive income scheme (Section 44AD for businesses, 44ADA for professionals) allows eligible taxpayers to declare income at a flat percentage of turnover without maintaining detailed books of accounts. It is genuinely useful for small businesses.
But eligibility has strict limits:
- Section 44AD (business): Turnover must not exceed ₹3 crore (for those with ≥95% digital receipts) or ₹2 crore (cash-based). If you exceed the limit even in one year, you cannot use presumptive taxation for the next 5 years.
- Section 44ADA (professionals — CA, doctor, lawyer, architect, engineer, etc.): Gross receipts must not exceed ₹75 lakh.
- Not eligible if: You have a business loss you want to carry forward, you are a company or LLP, or your income includes commission or brokerage income.
Filing ITR-4 when you exceed these limits, or when you are not in the eligible profession list for 44ADA, results in a defective return notice.
Mistake 11 – Not Reporting Foreign Assets or Foreign Income
Who this affects: Anyone who holds foreign bank accounts, foreign stocks, mutual funds listed abroad, property outside India, or has beneficial interest in a foreign entity.
The consequence: Non-disclosure of foreign assets is treated under the Black Money Act 2015 — a separate, more severe law with penalties starting at 3 times the undisclosed asset value plus flat ₹10 lakh penalty. This is not a standard income tax assessment. The CBDT actively receives information from foreign jurisdictions under OECD’s Common Reporting Standard (CRS) and FATCA.
Schedule FA (Foreign Assets) in the ITR must be completed by every resident individual or HUF that held any foreign asset at any point during FY 2025-26, even if it was sold before March 31.
Mistake 12 – Filing a Belated Return Without Understanding the Consequences
If you miss the July 31 2026 deadline, you can still file a belated return under Section 139(4) up to December 31 2026.
But belated returns come with consequences most people do not know:
- Late filing fee: ₹5,000 (₹1,000 if total income is below ₹5 lakh) under Section 234F
- Interest under Section 234A: 1% per month on unpaid tax from the original due date
- Losses cannot be carried forward: Business losses, capital losses, and speculative losses declared in a belated return cannot be carried forward to future years. This is a significant financial cost for active traders and investors.
- No option to opt for old tax regime in certain cases once the due date has passed
Fix: File on time — or at least before July 31. Even an estimated ITR filed on time is better than a perfect ITR filed late.
What to Do If You Already Made One of These Mistakes
If you have not filed yet: Correct the issue before filing. A clean first filing is always the best outcome.
If you already filed: File a revised return under Section 139(5) — available until December 31 2026 (for AY 2026-27). There is no limit on the number of revisions, but only the last revised return is considered the final submission.
If you received a Section 143(1) notice: Do not ignore it. Log in to the portal, go to Pending Actions → Response to Outstanding Demand, and either agree with the demand or submit a written explanation. Most 143(1) demands arise from resolvable data mismatches.
If the situation is complex: Engage a CA immediately. The response window on notices is short, and an incorrect response can make matters worse.
How Rudra Capital Protects You From ITR Notices
Our ITR filing process includes a mandatory pre-filing review: AIS reconciliation, Form 26AS cross-check, deduction verification, capital gains calculation from broker statements, regime comparison, and Schedule AL preparation where applicable.
We file under the correct ITR form for your exact income profile — not based on what you filed last year.
Services include:
- ITR filing for salaried individuals, freelancers, business owners, HNIs, and NRIs
- Capital gains calculation and reporting (stocks, mutual funds, property, crypto)
- Notice response and resolution (143(1), 148, 139(9) defect notices)
- Revised return filing
- Advance tax planning and computation
ITR filing deadline for AY 2026-27 is July 31 2026. Book your filing appointment now at +91-9953572838 or rudracap.com/itr-filing.
FAQs – ITR Filing AY 2026-27
Q1: What is the ITR filing deadline for AY 2026-27? July 31 2026 for salaried individuals and those not requiring audit (ITR-1 and ITR-2). August 31 2026 for taxpayers filing ITR-3 and ITR-4 without audit requirement. October 31 2026 for tax audit cases.
Q2: Can I correct a mistake after filing my ITR? Yes. File a revised return under Section 139(5) before December 31 2026. You can revise as many times as needed before this deadline.
Q3: What happens if I do not e-verify my ITR? The return is treated as not filed. You lose refund eligibility, and you are treated as a non-filer for that assessment year. E-verify within 30 days of filing — Aadhaar OTP takes under 2 minutes.
Q4: I have capital gains from selling a plot of land. Which ITR form do I use? Use ITR-2 (if you are salaried) or ITR-3 (if you have business income). Capital gains from immovable property must be reported in Schedule CG. Include the sale deed details, cost of acquisition, cost of improvement, and indexed cost calculation.
Q5: My AIS shows a transaction I did not do. What do I do? Submit a feedback on the AIS portal marking the entry as “Information is incorrect” or “Not pertaining to me.” The department reviews feedback and may update the AIS. File your ITR showing correct income with a written explanation for the discrepancy.
ITR filing deadline is July 31 2026. Book your filing appointment with Rudra Capital now to avoid last-minute errors. Call +91-9953572838 or book a free consultation here.
