10 Common Mistakes to Avoid When Filing ITR for AY 2026–27

The Annual Information Statement (AIS) and Form 26AS capture every financial transaction the IT Department knows about — salary TDS, bank interest, dividend income, mutual fund redemptions, property sales, and high-value purchases. If your ITR does not match these entries, the system auto-generates a mismatch notice under Section 143(1)(a). In AY 2026–27, the AIS has been expanded to include even small dividend credits and savings account interest above ₹10,000.

Selecting the incorrect ITR form is one of the most common and costly individual ITR filing mistakes. A salaried person with capital gains who uses ITR-1 (Sahaj) instead of ITR-2 files a defective return. A business owner using ITR-4 without qualifying for presumptive taxation under Section 44AD or 44ADA files an invalid return. A defective return is treated as a return not filed — which triggers late fees and potential scrutiny.

Many taxpayers believe that income which is exempt from tax does not need to be disclosed at all. This is wrong. Exempt income — including tax-free interest on PPF, long-term capital gains on equity below ₹1.25 lakh, agricultural income, HRA exemption, and gratuity — must still be reported in the correct schedule of your ITR. The AY 2026–27 forms include a dedicated Schedule EI (Exempt Income) for this purpose. Non-disclosure, even of income that attracts zero tax, can attract a notice for under-reporting.

For AY 2026–27, the new tax regime is the default for all individual taxpayers. Under the new regime, you enjoy zero tax up to ₹12 lakh (₹12.75 lakh with standard deduction for salaried), but you lose deductions under Sections 80C, 80D, 80E, HRA exemption, and home loan interest (Section 24b). Many taxpayers simply accept the default without checking if the old regime saves them more. A person with a ₹50 lakh home loan EMI, Section 80C investments of ₹1.5 lakh, and NPS contributions could save ₹1–2 lakh per year by opting for the old regime.

The Section 87A rebate provides zero tax up to ₹12 lakh of income under the new regime for AY 2026–27. However, this rebate is not available against income taxed at special rates — specifically Short-Term Capital Gains on listed equity/equity mutual funds (STCG under Section 111A, taxed at 20%) and Long-Term Capital Gains on equity above ₹1.25 lakh (LTCG under Section 112A, taxed at 12.5%). Many taxpayers — and some tax software — incorrectly apply the rebate against these special rate incomes, resulting in an incorrect return that the CPC (Centralised Processing Centre) rectifies, often issuing a demand notice.

Since AY 2023–24, income from cryptocurrency, NFTs, and other Virtual Digital Assets is taxable at a flat 30% under Section 115BBH — with no deductions allowed except the cost of acquisition, and no set-off against any other income. For AY 2026–27, the Schedule VDA in all applicable ITR forms has been expanded to require disclosure of each VDA transaction by date, acquisition cost, and sale value. The IT Department cross-matches this with data from Indian exchanges (who deduct TDS under Section 194S at 1%). If you traded crypto or received it as income and did not report it, you are at high risk of a notice.

If you hold any foreign assets — a bank account abroad, foreign stocks, ESOPs from a foreign parent company, or interests in an overseas trust — you must disclose them in Schedule FA. This requirement applies even if you earned zero income from those assets during FY 2025–26. Non-disclosure of foreign assets carries a penalty of ₹10 lakh per year under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. With global tax information exchange under FATCA and CRS, the IT Department increasingly receives automatic disclosures from foreign jurisdictions.

Your income tax refund is directly credited to the bank account you mention in your ITR. If the IFSC code is wrong, the account is not pre-validated on the portal, or the account belongs to a different PAN, the refund will fail — and you will need to raise a refund re-issue request, adding weeks of delay. In AY 2026–27, the portal mandates that only pre-validated bank accounts (verified on the e-filing portal) can receive refunds.

Filing your ITR online is only step one. Your return is not legally submitted until it is e-verified. From AY 2023–24 onwards, the e-verification window is 30 days from the date of filing (reduced from 120 days). If you do not e-verify within this window, your return is treated as not filed — attracting the same consequences as a missed deadline, including late fees under Section 234F and loss of carry-forward losses. E-verification can be done via Aadhaar OTP, net banking, bank ATM, or by sending the signed ITR-V to CPC Bengaluru.

The due date for individual ITR filing for AY 2026–27 (FY 2025–26) for non-audit cases is July 31, 2026. Missing this deadline means: a late fee of ₹5,000 under Section 234F (₹1,000 if income ≤ ₹5 lakh), interest at 1% per month on unpaid tax under Section 234A, permanent loss of the right to carry forward capital losses and business losses, and potential ineligibility for certain deductions under Sections 10A, 10B, and Chapter VI-A. Belated returns can only be filed up to December 31, 2026.