What people got wrong in filing tax returns; how they can do better in 2026

Tax experts say that omissions, data mismatches, and common assumptions were the primary causes of defective returns, penalties, and delayed refunds this year, urging timely preparation for 2026

Experts reviewing tax returns filed this year find that most errors and document rejections were caused due to omissions, mismatches, and assumptions. They say such missteps led to defective returns, delayed refunds and sometimes tax demands.

 

Kinjal Bhutta, treasurer at Bombay Chartered Accountants’ Society, said most errors were due to mismatches between taxpayers’ calculations and the figures reflected in the Annual Information Statement (AIS). Many also misreported capital gains, claimed incorrect rebates, or skipped mandatory forms such as Form 10B/10BB, Form 67 for foreign tax credit, and regime-change forms. A recurring oversight was failure to e-verify the return on time.

 

 

Bhutta cited a case where a senior corporate executive manually entered equity gains instead of using broker-reported data in AIS. “The mismatch triggered an automated query, requiring a revised return.”

 

Deepesh Chheda, partner at Dhruva Advisors, said non-reporting of interest income, non-disclosure of exempt income, and failure to report income from previous employers is another common mistake. Many taxpayers skipped reporting foreign assets or capital gains, and others left out dormant bank accounts that need to be disclosed.

Where taxpayers suffered the highest financial impact

According to Bhutta, misreported capital gains, wrong tax deducted at source credits and unreported interest may lead to demand notices and blocked refunds. In one case, a freelancer misclassified futures and options losses without filing the required audit report. “The return was processed as defective, the refund was delayed by four months, and the interest liability rose sharply,” she said.

 

Chheda said incorrect HRA claims, excess deductions and errors in property or equity-gain reporting often attracted penalties of 50–200 per cent for under-reported income. Non-disclosure of foreign assets, he says, drew heightened scrutiny.

 

Deepashree Shetty, partner at BDO India, adds that taxpayers who forgot to report advance tax payments saw lower refunds and had to file revised returns, delaying processing further.  ALSO READ | Got tax alert on property deals or foreign assets? I-T dept explains why

Misconceptions that persisted throughout the year

Experts agree that assumptions caused as many errors as omissions. Bhutta points to a growing belief that AIS/TIS is either always accurate or always wrong, both of which led to incorrect filings. Many did not cross-verify AIS entries, especially for capital markets.

 

Shetty says taxpayers often assume the new tax regime always yields lower tax, missing out on deductions. “Several salaried individuals also believed they cannot switch regimes while filing the ITR,” she notes.

 

Chheda highlights confusion around exempt income reporting, classification of capital gains, and misplaced reliance on pre-filled data.

How to avoid a repeat in 2026

 

Experts recommend a more disciplined, early-stage approach:

 

• Download AIS, TIS and Form 26AS and cross-verify every income source before filing.
• Review broker statements and reconcile capital gains quarterly.
• Decide old vs new regime at the start of the year, using simulations.
• Maintain digital folders for rent receipts, insurance, NPS, and investment proofs.
• Ensure correct ITR form selection and mandatory schedules.
• File and e-verify on time to avoid invalid returns.

 

As Bhutta puts it, taxpayers should expect disclosure changes under the new Income Tax Act, 2025, and “be vigilant even for non-mandatory fields that may trigger assessments.”

 

The broad message from tax experts this year is that timely preparation and thorough reconciliation remain the most effective safeguards against notices, penalties and delayed refunds