The income tax return (ITR) filing season is here, and millions of salaried employees have already started collecting documents, downloading Form 16 and preparing to file their returns.
But tax experts say taxpayers can no longer afford to treat ITR filing as a routine annual exercise.
The reason is simple: the Department is increasingly relying on artificial intelligence (AI), data analytics and automated systems to match what taxpayers report in their returns against information received from employers, banks, mutual funds, brokers and other financial institutions.
In other words, the taxman now has more data than ever before — and a better ability to spot discrepancies.
Experts warned that even small omissions, incorrect disclosures or mismatches can trigger notices, delay refunds or invite scrutiny. Here are eight common mistakes taxpayers should avoid while filing returns for Assessment Year 2026-27.
Tax-saving deductions can lower your tax liability, but only if you can support them with proper documentation.
Mayank Mohanka, Founder of TaxAaram.com, told ET Wealth that taxpayers claiming House Rent Allowance (HRA), particularly when rent is paid to parents or relatives, should maintain proper agreements, payment records and supporting documents.
The Income Tax Department has scrutinised such claims in the past, especially where the rent recipient has not reported the income in their own tax return.
The same principle applies to donations and other deductions. If you claim a tax benefit, you should be prepared to prove it.
Archit Gupta, Founder and CEO of ClearTax, told ET Wealth that deduction claims under Section 80G have become more detailed. Taxpayers now need to provide additional information such as transaction reference numbers and IFSC details. In the case of political donations, details such as the political party’s PAN may also be required.
Many salaried employees assume that if Form 16 looks correct, their job is done.
Tax experts say that is a mistake.
Before filing your return, compare the information in Form 16 with your Annual Information Statement (AIS), Tax Information Statement (TIS) and Form 26AS.
These documents contain information reported directly to the Income Tax Department by banks, employers, brokers, mutual funds and other institutions.
Sudhakar Sethuraman, Partner at Deloitte India, told ET Wealth that taxpayers often overlook small items such as savings account interest, fixed deposit interest, dividend income or minor TDS entries.
“Even minor discrepancies can result in automated notices,” he said, adding that taxpayers should carefully review AIS and provide feedback wherever incorrect entries appear.
While AIS has become an important tool for taxpayers, experts say it is not perfect.
In some cases, data may be duplicated, reported incorrectly or updated with delays. There can also be timing differences between when income is reported and when it becomes taxable.
Shalini Jain, Tax Partner at EY India, told ET Wealth that taxpayers continue to face data accuracy challenges due to duplicate entries, incorrect classifications and delayed updates.
That means blindly accepting pre-filled information could create problems of its own.
Experts advise taxpayers to carefully review AIS entries instead of assuming every figure is correct.
Selecting the correct ITR form may seem like a technical detail, but it can have serious consequences.
A taxpayer with foreign assets, foreign income, multiple house properties or certain types of capital gains may not be eligible to use ITR-1.
Similarly, taxpayers involved in Futures & Options (F&O) trading or business activities may need to file ITR-3 instead.
Mohanka told ET Wealth that using the wrong form or failing to make mandatory disclosures can trigger avoidable scrutiny and queries from the tax department.
Before filing, taxpayers should ensure they are using the correct return form for their specific situation.
One of the most common reasons for tax notices is forgotten income.
Many taxpayers disclose their salary income but leave out interest earned on savings accounts, fixed deposits, recurring deposits, dividends or capital gains because the amounts appear insignificant.
However, those transactions are often already reported to the Income Tax Department by banks and financial institutions.
Gupta told ET Wealth that the department can easily identify discrepancies by matching information from banks, TDS statements, credit card transactions and other reporting sources.
Even a small amount of unreported income can result in questions later.
Investors need to be particularly careful this year.
Following changes announced in Budget 2024, capital gains reporting has become more complicated.
Taxpayers are now required to distinguish between transactions executed before and after July 23, 2024 in certain cases. Experts say many investors also make mistakes while classifying gains as short-term or long-term.
Sethuraman told ET Wealth that taxpayers frequently overlook loss set-off and carry-forward provisions as well, resulting in incorrect tax calculations.
Before filing, investors should reconcile broker statements, mutual fund statements and AIS data to ensure consistency.
If you changed jobs during the financial year, you need to be extra careful.
Many employees receive separate Form 16 certificates from their old and new employers. However, neither employer usually factors in salary paid by the other while calculating tax deductions.
As a result, the total TDS deducted may be lower than the actual tax liability.
Taxpayers should combine salary income from all employers and recalculate their final tax position before filing.
Ignoring this step could lead to a tax demand later.
Many taxpayers believe their job is done once the return is submitted.
It isn’t.
A return must also be verified within the prescribed timeline.
Jain told ET Wealth that taxpayers should complete verification within 30 days of filing to ensure the return is treated as valid.
Failure to verify can result in the return being considered invalid, effectively meaning it was never filed.
Experts also advise against waiting until the last week before the deadline, as rushed filings often lead to mistakes and leave little time to correct errors.
The biggest change in tax compliance today is not a new deduction, tax slab or exemption.
It is the way tax returns are being monitored.
Banks report your interest income. Employers report your salary. Brokers report your stock market transactions. Mutual funds report your investments. All this information is matched against your tax return through automated systems.
As Sethuraman told ET Wealth, system-generated notices and alerts have increased significantly because data from multiple sources is now being cross-checked more aggressively.
The good news is that most tax notices are avoidable.
Before filing your return, spend some time reconciling Form 16, AIS, Form 26AS and other financial records. A few extra minutes of checking today could save months of explanations later.