ITR forms for AY27: What's changed, how to choose, mistakes to avoid

Experts explain how to choose the correct form, avoid mistakes and use compliance mechanism

Income Tax Return (ITR) forms for Assessment Year 2026–27 (AY27) have been notified, alongside updates to the compliance mechanism and verification rules. While the broad structure remains unchanged, experts say the focus this year is on tighter compliance, data matching, and fewer errors.

 

Choosing the right ITR form

Selecting the correct ITR form remains the first critical step.

 

“The choice of selecting the correct ITR form is to be based on the various types of income earned by the taxpayer during the relevant year,” said Mrinal Mehta, a chartered accountant and joint secretary, Bombay Chartered Accountants’ Society.

 

The thumb rule is to separate taxpayers by income source. “No business income means ITR-1 or ITR-2, while business or professional income moves you to ITR-3 or ITR-4,” said Sudhir Kaushik, cofounder and chief executive officer, TaxSpanner.

 

 

Correct forms

 

• Salaried individuals with limited income streams typically fall under ITR-1
• Investors with capital gains or multiple properties must use ITR-2
• Professionals and freelancers maintaining books of account should file ITR-3
• Small businesses under presumptive taxation can opt for ITR-4

 

“Getting this choice wrong does not just mean a defective return notice, it leads to avoidable panic and wasted time,” said Parag Jain, a chartered accountant and tax head at 1 Finance.

 

ITR-U: A second chance, but not a free pass

An important change this year is the extension of the ITR-U (updated return) window from two years to four years.

 

“ITR-U is an option given to taxpayers to come clean on pending or missed tax payments by discharging the taxes due along with additional tax and interest,” said Mehta.

 

It is meant for cases such as missed filings, underreported income, or errors discovered after deadlines. 

However, ITR-U has limitations. “ITR-U is a ‘pay more and stay compliant’ tool, not a refund correction option,” said Kaushik, adding that it cannot be used to reduce tax liability or increase refunds.

 

The cost of delay is high. “You pay 25 per cent additional tax if you file within 12 months, 50 per cent within 24 months, and up to 70 per cent if you delay further,” says Jain.

 

What has changed this year

Experts highlight a mix of flexibility and tighter reporting requirements:

• ITR-1 and ITR-4 now allow up to two house properties to be cited for tax reporting.
• Revised return deadline extended to March 31
• More detailed disclosures are required for deductions and transactions
• Greater reliance on pre-filled data and AIS

 

“This year, ITR filing has become more practical with simpler forms covering more cases, but compliance is tighter with better tracking of PAN, TDS and transactions,” said Ritika Nayyar, partner, Singhania & Co.

 

A shift towards stricter compliance

Although returns for AY 2026–27 will still be governed by the Income Tax Act, 1961, the compliance environment is evolving.

 

“The system is moving toward simpler forms but tighter reporting, so accuracy matters more than ever,” said Nayyar.

 

The upcoming framework is expected to introduce more structured reporting and stronger data matching.

 

“The department will cross-check using analytics-driven verification, which means discrepancies may be flagged even before processing,” says Jain.

 

Vivek Jalan, a chartered accountant and partner at Tax Connect Advisory Services, said that even individuals below taxable thresholds may still need to file returns in certain scenarios. These include cases involving high TDS deductions, large bank deposits, foreign travel expenses, or high electricity consumption.

 

Common mistakes taxpayers should avoid

 

Experts flag several recurring errors that can lead to notices or delays:

 

• Mismatch with AIS or Form 26AS
• Incorrect ITR form selection
• Failure to disclose all income sources
• Incorrect deduction claims without documentation
• Delayed ITR-V verification

 

“If the return is verified beyond 30 days, it is treated as filed late, and consequences such as interest and penalties will follow,” said Mehta.

 

“Not reconciling your return with AIS or failing to pre-validate your bank account can delay refunds or trigger notices,” said Chandni Anandan, chartered accountant, tax expert, ClearTax.