Key ITR Filing Mistakes to Avoid for AY 2026-27

The Income Tax Act, 1961, mandates accurate and timely filing of Income Tax Returns (ITRs). For Assessment Year (AY) 2026-27, taxpayers must be particularly vigilant to avoid common errors. These errors can trigger scrutiny, penalties under the Act, or even lead to rejection of the return. This post highlights critical mistakes and provides insights to help taxpayers file accurate returns.

Filing Beyond the Due Date

The deadline for filing ITRs for AY 2026-27 is typically July 31st, 2026, for individuals, Hindu Undivided Families (HUFs), and certain businesses. A different deadline applies to taxpayers who require a tax audit. Missing this deadline attracts penalties under Section 234F of the Income Tax Act. The penalty can range from ₹1,000 to ₹5,000, depending on the delay and the taxpayer’s total income. Filing late also means you may lose the opportunity to carry forward losses to offset future income.

Misreporting Capital Gains

Capital gains, covered under Section 45 to Section 55 of the Income Tax Act, require precise reporting. Taxpayers often err when calculating the cost of acquisition, especially for inherited assets. They also make mistakes regarding indexation benefits for long-term capital gains, or by failing to correctly categorize the nature of the asset (long-term or short-term). For example, if shares are sold, the correct dates of acquisition and sale, along with the accurate sale consideration and expenses, must be reported in Schedule CG of the ITR form. Any discrepancies can trigger notices.

Discrepancies between ITR and AIS

The Annual Information Statement (AIS), introduced under Rule 114-I of the Income Tax Rules, provides a consolidated view of a taxpayer’s financial transactions. The Income Tax Department uses this data to cross-verify the information provided in the ITR. Failing to reconcile the ITR with the AIS is a common mistake. If the AIS reflects interest income from a savings account that isn't reported in the ITR, this will raise a red flag. Taxpayers must carefully review their AIS and ensure all income sources, deductions, and investments are accurately reflected in their ITR.

Incorrect Claiming of Deductions

Taxpayers must carefully review Chapter VI-A of the Income Tax Act, which details various deductions. Many incorrectly claim ineligible expenses or exceed permissible limits. For instance, if a taxpayer claims a deduction under Section 80C for an investment that doesn't qualify, it can lead to disallowance of the deduction and potential tax liability. Taxpayers must gather and retain supporting documents for all deductions claimed.

Using The Wrong ITR Form

Choosing the right ITR form is essential. The Income Tax Department has different forms (ITR-1, ITR-2, ITR-3, ITR-4, etc.) based on the income source. Using the wrong form can result in delays or rejection. If an individual with business income files ITR-1 (for individuals with salary, house property, and other sources) instead of ITR-3 or ITR-4, the ITR will likely be considered defective. The correct form ensures all relevant income and deductions are reported as the law requires.

Failing to E-Verify the ITR

E-verification is a mandatory step. According to the Income Tax Rules, an ITR has to be verified within a specified timeframe (usually 30 days from filing). If the return is not e-verified, it will be considered invalid. E-verification can be done through Aadhaar OTP, net banking, or a Digital Signature Certificate (DSC).

Mistakes in Bank Account Details

Providing incorrect bank account details is a common error that can cause problems. The Income Tax Department uses this information for processing refunds and other communications. Ensure the account number, IFSC code, and the bank name are accurately entered.

For example: A taxpayer invests ₹2,00,000 in eligible investments under Section 80C. The maximum deduction allowed is ₹1,50,000, subject to the various investments made. (This is illustrative only. Actual liability depends on applicable slab rates, surcharge, cess, and the specific facts of each case.)

Disclaimer: This article is for educational and informational purposes only and does not constitute professional advice. Please consult a qualified Chartered Accountant for advice specific to your situation.