Income tax return filing: How to avoid errors, notices and refund delays

Make sure to match Form 16 with AIS and Form 26AS, choose the correct ITR form, and compare tax regimes before filing

The income-tax return (ITR) filing season for assessment year (AY) 2026-27 is underway, and millions of salaried taxpayers are preparing to file their returns. While many rely on Form 16, tax filing has become more nuanced with the introduction of the annual information statement (AIS), wider data reporting, the new tax regime, and stricter verification systems. Taxpayers need to go beyond basic compliance by reconciling income details, choosing the right ITR form and tax regime, and conducting final checks to avoid errors, notices, or refund delays.

Key ITR changes in AY2026-27

According to tax experts, the change that will affect the largest number of salaried taxpayers is the expansion of ITR-1 eligibility. Earlier, even small capital gains from listed shares or equity mutual funds often required filing ITR-2. Now, subject to conditions, many taxpayers can continue using the simpler ITR-1. For systematic investment plan (SIP) investors, this is a welcome simplification.

 

The relaxation for two self-occupied properties is another practical change for families with a second home or spouses working in different cities. “More importantly, this year is about data visibility. With wider reporting and stronger verification systems, even small omissions in interest income or investment transactions can trigger mismatches. The focus is no longer just on choosing the right form, but on ensuring all reported information matches the department’s records,” says Vishwas Panjiar, managing partner, SVAS Business Advisors.

Enhanced reporting and compliance checks

While the ITR forms for AY2026-27 remain broadly similar to previous years, some changes aim to simplify compliance and strengthen verification. The scope of ITR-1 has been expanded, allowing more taxpayers to use the simpler form.

 

At the same time, certain disclosures have become more detailed. For instance, taxpayers claiming donation deductions may need to provide transaction reference numbers, bank details and Indian Financial System Code (IFSC), while donations to political parties require disclosure of the recipient’s name and Permanent Account Number (PAN).

 

“These changes reflect the tax department’s growing focus on data-driven compliance and automated verification. With more granular reporting and enhanced data matching, mismatches are likely to be identified more quickly, making accurate disclosures increasingly important,” says Neeraj Agarwala, senior partner, Nangia & Co.

How to reconcile Form 16, AIS and Form 26AS

A common misconception is that Form 16 contains everything needed to file a return. In reality, it only captures information reported by the employer. Taxpayers should first reconcile salary income and tax deducted at source (TDS) in Form 16 with Form 26AS, and then review AIS for income sources outside the employer’s visibility.

 

“The most common omissions are interest income and dividends, which may seem insignificant but are often reflected in AIS. Capital gains from mutual fund redemptions are another area that taxpayers frequently overlook. Those who changed jobs during the year should be especially careful, as income from the previous employer may not have been fully considered by the new employer, leading to tax shortfalls or mismatches,” says Panjiar.

 

A simple rule: If a transaction appears in AIS but not in the return, ensure there is a valid reason for the difference.

What to do if the forms do not match

When Form 16, AIS and Form 26AS do not match, the key question is not which document is correct, but why the difference exists. For TDS-related issues, Form 26AS is particularly important as it reflects the department’s tax records. If TDS appears in Form 16 but not in Form 26AS, taxpayers should follow up with the employer or deductor before filing.

 

“For income mismatches, taxpayers should rely on underlying records such as bank statements, interest certificates and broker statements. AIS is a valuable compliance tool, but errors such as duplicate reporting or incorrect classifications can occur. In such cases, taxpayers should use the AIS feedback facility and retain supporting documents,” says Panjiar.

 

Unexplained inconsistencies often trigger scrutiny. Even a small mismatch can create problems if the taxpayer leaves it unaddressed.

Who should file ITR-2, ITR-3 or ITR-4?

A common mistake is assuming that the ITR form depends only on whether a person is salaried. In reality, it depends on the taxpayer’s overall income and asset profile.

 

ITR-2 is generally required where a salaried individual has capital gains, foreign assets or income, or is a company director. Foreign employee stock option plan (ESOP) holdings are a frequent area of confusion. ITR-3 applies where salary income is accompanied by business or professional income, such as consulting, freelancing, content creation or trading activities. ITR-4 is available only for taxpayers eligible for the presumptive taxation scheme.

 

“Many filing errors occur because taxpayers focus solely on salary income and overlook other income streams or assets. Reviewing the full financial profile before filing can help avoid defective return notices,” says Panjiar.

Common errors and their consequences

Taxpayers should choose their ITR form based on their income sources and financial transactions during the relevant year, rather than simply using the same form as in previous years. A change in income, asset holdings, or transactions may require a different form.

 

For instance, ITR-1 is meant for resident individuals with income up to Rs 50 lakh from salary, up to two house properties, and other sources such as interest and dividends, with only limited capital gains reporting. ITR-2 applies to individuals with income above Rs 50 lakh, substantial capital gains, foreign assets, or agricultural income exceeding Rs 5,000.

 

“Using the wrong form can lead to inadequate disclosures and penalties. For example, a taxpayer with foreign assets filing ITR-1 may fail to report those assets, while someone who sold a property during the year may need to shift from ITR-1 to ITR-2,” says Aarti Raote, partner, Deloitte India.

Old versus new tax regime: Compare before filing

Salaried individuals can choose between the old and new tax regimes while filing their returns. Since the new regime is the default option, taxpayers should carefully compare the tax liability under both regimes after considering their income, eligible deductions and exemptions. Tax calculators provided by the Income Tax Department and employers can help with this assessment. Even if a taxpayer opts for one regime with the employer during the year, they can change the regime while filing the income-tax return.

Who should still consider the old tax regime?

According to tax experts, employees claiming substantial deductions such as house rent allowance (HRA), leave travel concession (LTC), deductions under Chapter VI-A, or home loan benefits may still find the old tax regime more beneficial.

 

Taxpayers should also review the return carefully before submitting it. “A simple check would be to compare the details reported in the AIS, TIS, and Form 26AS with the income disclosed in the return to ensure nothing has been omitted. Taxpayers should also review Form 16 to verify that all eligible deductions have been claimed and that the figures reported in the return match the information provided by the employer,” says Raote.

Biggest mistakes to avoid while filing returns

One of the most important steps this year is selecting the correct ITR form. With the expanded scope of ITR-1, taxpayers with up to two house properties may now be able to use the simplified return form.

 

Taxpayers should also avoid relying solely on AIS while filing returns. “Although AIS is a valuable compliance tool, its contents should be reconciled with Form 16, Form 16A, bank statements, capital gains statements and other financial records. Proper verification can help prevent omissions, reporting errors and mismatches that may lead to notices or compliance queries later,” says Agarwala.

Correcting mistakes in your ITR

If a taxpayer discovers an omission, incorrect disclosure, wrong deduction claim, or any error in income reporting after filing the return, they should first assess its impact and file a revised return under Section 139(5) of the Income-tax Act, 1961. A revised return replaces the original return and should contain complete and accurate information.

 

“Taxpayers should not wait for a notice from the department once an error has been identified. Promptly filing a revised return demonstrates voluntary compliance and can help minimise the risk of future disputes or notices,” says Agarwala. 

 

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(The writer is a Delhi-based independent journalist)