Filing your Income Tax Return (ITR) is no longer just a formality. With data analytics, cross-verification tools like AIS, Form 26AS, TIS, and SFT, the Income Tax Department now flags even the slightest mismatch. If you make certain mistakes, your return could get marked as defective or worse—land you a notice under Section 139(9), 143(1)(a), or even 148.
In this article, we’ll go beyond the headlines and explain 7 major errors taxpayers commonly make—and offer practical ways to stay compliant and notice-free for AY 2025‑26.
1. Not Reporting All Sources of Income
Even if some incomes are exempt or small in value, not disclosing them can lead to a notice.
What should be reported:
- Salary + Bonus + Gratuity
- Interest from savings, fixed deposits, recurring deposits
- Dividend from shares or mutual funds (taxable above ₹5,000 if TDS applicable)
- Capital Gains—even exempt LTCG up to ₹1.25 lakh from equity shares/MFs must be declared
- Family pension
- Rental income (including from co-owned properties)
- Freelance/Side income (gigs, consulting, tuition, etc.)
✅ Tip: Cross-check with your Annual Information Statement (AIS) before final submission. Any income the department sees—but you don’t report—will trigger auto-adjustments or notices.
2. Choosing the Wrong ITR Form
Selecting an incorrect form can result in a defective return notice under Section 139(9), making your return “invalid” unless corrected in time.
Examples:
- Filing ITR-1 despite capital gains from stocks → should have used ITR-2
- Using ITR-4 when turnover > ₹2 Cr or claiming ineligible deductions → switch to ITR-3
- HUFs or individuals holding unlisted shares must avoid ITR-1/4
✅ Tip: When in doubt, use the higher ITR form. Filing ITR-2 instead of ITR-1 is not wrong—but the reverse is.
3. Mismatch in TDS, Tax Paid, or Bank Details
Many taxpayers rely solely on Form 16, but forget other TDS entries that may appear in:
- Form 26AS
- Form 16A (from FDs, RDs, etc.)
- AIS/TIS (reflecting even TDS from online income platforms like Upwork, YouTube, etc.)
Mismatch in:
- TDS credit claimed in return ≠ TDS in Form 26AS
- Wrong PAN of deductor
- Incorrect challan BSR code / CIN for self-assessment tax
… can delay refunds or trigger demand notices.
✅ Tip: Always match TDS entries from Form 16 + Form 26AS + AIS before filing. If any tax is missing, follow up with the deductor.
4. Non-Disclosure of Foreign Assets / Income
If you are a Resident and Ordinarily Resident (ROR) in India, you are legally required to report all foreign assets & income in Schedule FA, even if:
- You earn zero income from those assets
- The asset was inherited or jointly held
- Income is already taxed abroad
This includes:
- Foreign bank accounts (NRE/NRO)
- Overseas stocks, ESOPs
- Crypto wallets on foreign exchanges
- Properties abroad
- Business interests or trusts
Non-disclosure could invite hefty penalties under the Black Money Act.
✅ Tip: If you’ve been an NRI but now qualify as ROR, consult a CA to help report foreign holdings correctly in Schedule FA + Schedule FSI + Form 67 (for FTC).
5. Claiming False or Inflated Deductions
Deductions under Chapter VI-A (80C to 80U) are frequently misused or miscalculated.
Common mistakes:
- Submitting fake rent receipts for HRA
- Claiming LIC premiums not actually paid
- Inflating medical insurance premium
- Deducting home loan principal for houses not yet in possession
- Double-claiming deduction for tuition fees or donations
The Department now asks for proofs during scrutiny, and misuse may lead to demand notices with interest + penaltyunder Sections 270A/271(1)(c).
✅ Tip: Always retain soft copies of rent agreements, premium receipts, investment proofs, donation certificates, etc. Claim only if you genuinely paid.
6. Ignoring SFT-linked High-Value Transactions
The IT department receives Statement of Financial Transactions (SFT) from:
| Entity | Triggers |
| Banks | Cash deposits > ₹10L, FD > ₹10L |
| Mutual funds | Purchase > ₹10L in a year |
| Credit card issuers | Payment > ₹1L (cash), ₹10L (non-cash) |
| Registrars | Property purchase/sale > ₹30L |
| Companies | Dividend payout > ₹10L, share buybacks |
Even if you don’t file an ITR, these transactions flag you in the system.
✅ Tip: If you made any such transactions, filing ITR is mandatory, regardless of taxable income. Failing to do so can lead to a compliance notice under Section 285BA.
7. Not Filing ITR When It’s Mandatory
Many assume ITR filing is optional if no tax is payable. That’s incorrect.
You must file ITR if in FY 2024‑25:
- Your gross total income before deductions exceeds:
- ₹2.5 L (age < 60)
- ₹3 L (age 60–79)
- ₹5 L (age 80+)
- You deposited > ₹1 Cr in bank
- Paid > ₹2L for foreign travel
- Paid > ₹1L electricity bill
- Owned foreign assets or income
- Want to claim refund
- Want to carry forward losses
Skipping ITR in these cases can lead to:
- Notices
- Loss of refund
- Inability to carry forward losses
- Penalty under Section 234F
✅ Tip: File a belated return (with late fee) before 31 Dec 2025 if you missed the original deadline of 15 Sept 2025.
Final Checklist to Stay Notice-Free
✅ Reconcile income from salary + interest + capital gains
✅ Use the correct ITR form (ITR-1, 2, 3, or 4 as applicable)
✅ Match TDS from 26AS and AIS
✅ Pay & report self-assessment tax, if any
✅ Avoid overclaiming deductions
✅ Disclose foreign income/assets if ROR
✅ E-verify your ITR within 30 days of filing
✅ Keep supporting documents for 6 years
Need Professional Help?
If you’re unsure about the form, regime, disclosures or TDS mismatches—don’t guess.
Consult a Chartered Accountant or engage a tax expert.
G R Prasad & Associates, Chartered Accountants, based in Kondapur, Hyderabad, offer:
✅ Salary ITR filing with AIS/TIS validation
✅ Foreign income & FTC reporting
✅ Crypto taxation support
✅ Belated & revised returns
✅ Scrutiny response handling