15 Common ITR Filing Mistakes That Delay Refunds and Trigger Notices

15 Common ITR Filing Mistakes That Delay Refunds and Trigger Notices

The Income Tax Department processes crores of returns every year using automated systems that cross-reference your filed data against multiple sources: employer TDS returns, bank interest reports, mutual fund transactions, property registrations, and more. Any mismatch, however small, can delay your refund or trigger a notice.

This guide lists the 15 most common ITR filing mistakes that Indian taxpayers make, explains why each one causes problems, and tells you how to avoid or fix them for AY 2026-27.

Mistake 1: Choosing the Wrong ITR Form

This is the most basic error and leads to an immediate defective return notice under Section 139(9).

Common scenarios:

Why it happens: Salaried employees who sold mutual funds or stocks during the year file ITR-1 out of habit, not realizing that capital gains above Rs 1.25 lakh require ITR-2. Similarly, freelancers earning above the presumptive threshold file ITR-4 instead of ITR-3.

Fix: If you receive a defective return notice, you have 15 days to file a corrected return in the correct form. If you catch the mistake yourself before the deadline, file a revised return.

Mistake 2: Not Checking AIS Before Filing

The Annual Information Statement (AIS) is the department's complete view of your financial transactions. It contains data from banks, mutual fund houses, stockbrokers, property registrars, and employers. If any income in your AIS does not appear in your ITR, the mismatch will be flagged.

What people miss:

• Interest from savings accounts across multiple banks
• Fixed deposit interest (even if TDS was deducted)
• Dividend income from mutual funds and shares
• Capital gains from mutual fund redemptions
• High-value transactions (purchases, cash deposits)
• GST turnover (for business owners)

Fix: Before filing, download your AIS from incometax.gov.in under the "AIS" section. Review every transaction. If something in the AIS is incorrect (duplicate entry, wrong amount), submit feedback on the AIS portal to flag the discrepancy.

Mistake 3: Claiming TDS Not Reflected in Form 26AS

This causes a direct mismatch between your claimed credits and the department's records.

The rule: You can only claim TDS credit in your ITR for amounts that appear in your Form 26AS. If your Form 16 shows Rs 2,00,000 TDS deducted but your Form 26AS shows only Rs 1,80,000, the Rs 20,000 difference cannot be claimed. The department will either reject the excess claim or reduce your refund.

Why it happens: The employer or deductor filed a late or incorrect TDS return, or the correction has not been processed yet.

Fix: Contact the deductor and ask them to file a corrected TDS return on TRACES. Wait for the correction to reflect in Form 26AS before claiming the credit in your ITR.

Mistake 4: Wrong or Unvalidated Bank Account

Your refund is credited directly to the bank account you specify in the ITR. If the details are wrong, the refund fails.

Requirements for the refund bank account:

• The account must be pre-validated on the income tax portal
• The PAN must be linked to the bank account
• The account must be active (not dormant, frozen, or closed)
• The IFSC code must be current (banks merge and codes change)

Why refunds fail: The taxpayer enters an old savings account number that has been closed, or an IFSC code that changed after a bank merger (e.g., HDFC Bank branches previously under eAB codes).

Fix: Before filing, log into incometax.gov.in, go to Profile > My Bank Account, and pre-validate the account you want the refund credited to. Ensure it shows "Validated" status.

Mistake 5: PAN-Aadhaar Not Linked

If your PAN is not linked to your Aadhaar, your PAN becomes "inoperative." An inoperative PAN means:

• Your ITR cannot be processed
• TDS is deducted at a higher rate (20% instead of applicable rate)
• Refunds will not be issued

Current status: The linking deadline has passed. If your PAN is inoperative, you must pay a late fee of Rs 1,000 under Section 234H and link it through the NSDL or UTIITSL portal before filing your ITR.

Exempt categories: Residents of Assam, Meghalaya, and Jammu & Kashmir; non-residents; persons aged 80+ (super senior citizens); and foreign citizens are exempt from PAN-Aadhaar linking.

Mistake 6: Not E-Verifying Within 30 Days

Filing is only half done. Until you e-verify, the department treats your return as if it was never filed.

The 30-day rule: You have exactly 30 days from the date of electronic filing to e-verify your return. This window was reduced from 120 days by CBDT. If you miss it:

• The return is treated as not filed
• You lose all benefits (refund, loss carry-forward, assessment protection)
• You must either get a condonation of delay approved or file a fresh return (belated, with penalty)

Fix: E-verify immediately after filing. Aadhaar OTP is the fastest method and takes under two minutes.

Mistake 7: Not Reporting All Bank Account Interest

Banks report all interest paid to you in the AIS. If you have five savings accounts and only report interest from one, the department will catch the mismatch.

Key facts:

• Interest up to Rs 10,000 from savings accounts is deductible under Section 80TTA (old regime). You must still report the full interest as income and then claim the deduction.
• FD interest is fully taxable. Even if the bank deducted TDS on it, you must report the gross interest in your ITR.
• Recurring deposit interest is taxable as income from other sources.

Fix: Check your AIS for all interest entries. Add them all under "Income from Other Sources" in your ITR. Claim 80TTA deduction separately under Chapter VI-A (only available under old regime).

Mistake 8: Incorrect HRA Exemption Claim

HRA exemption under Section 10(13A) is one of the most common areas where taxpayers over-claim.

The three-part test (minimum of these three is exempt):

1. Actual HRA received from employer
2. Rent paid minus 10% of basic salary
3. 50% of basic salary (metro) or 40% of basic salary (non-metro)

Common errors:

• Claiming HRA while also claiming home loan interest deduction for the same city (this is not automatically disallowed, but if the self-occupied property is in the same city where you claim to be renting, expect scrutiny)
• Not having rent receipts or rental agreement for rent above Rs 1,00,000 per year
• Landlord's PAN not provided when rent exceeds Rs 1,00,000 per year
• Claiming HRA under the new tax regime (HRA exemption is not available under the new regime)

Fix: Keep rent receipts, rental agreement, and landlord's PAN. If audited, you will need to produce these documents.

Mistake 9: Forgetting to Report Capital Gains

Many salaried employees who invest in mutual funds through SIPs forget that every redemption is a capital gains event, even if they reinvested the money.

Commonly missed capital gains:

• Mutual fund switch transactions (switching from one scheme to another is a redemption + purchase)
• ELSS redemption after the 3-year lock-in (taxable as LTCG above Rs 1.25 lakh)
• Equity share sales through Demat account
• Debt fund redemptions (taxed at slab rate from April 2023 onwards for funds purchased after March 31, 2023)

Fix: Download your capital gains statement from CAMS/KFintech (for mutual funds) or your broker's annual tax P&L statement. Cross-check with AIS entries.

Mistake 10: Wrong Assessment Year

This sounds trivial but filing under the wrong assessment year happens more often than you would expect.

• FY 2025-26 income must be filed under AY 2026-27
• If you accidentally select AY 2025-26, you are filing a duplicate or revised return for the previous year

The e-filing portal does show a warning, but taxpayers sometimes dismiss it.

Fix: Always verify the assessment year on the first page of the ITR form before proceeding.

Mistake 11: Not Reporting Exempt Income

Exempt income still needs to be reported in the ITR under the "Exempt Income" schedule. Failing to report it can trigger a mismatch with AIS data.

Commonly missed exempt income:

• Agricultural income (reported in Schedule EI)
• PPF interest and maturity proceeds
• Long-term capital gains on equity up to Rs 1.25 lakh (exempt under Section 112A threshold)
• Dividend from mutual funds up to the basic exemption limit (note: dividends are now taxable, but the threshold exemption applies)

Fix: Fill the Exempt Income schedule in your ITR form even if the income is not taxable.

Mistake 12: Mismatch in Salary Reported vs Form 16

If you changed jobs during the year and did not provide your previous employer's salary details to the new employer, each employer computes TDS independently. The result: under-deduction of TDS and a mismatch in total salary reported.

Fix: When filing your ITR, add salary from all employers during the year. Calculate the correct total income and pay any shortfall as self-assessment tax (using Challan 280) before filing.

Mistake 13: Not Disclosing Foreign Assets or Income

If you hold any foreign bank account, foreign shares (including US stocks through platforms like Vested, INDmoney, or Groww Global), RSUs from a foreign employer, or any foreign asset, you must fill Schedule FA (Foreign Assets) in your ITR.

Consequences of non-disclosure:

• Penalty of Rs 10 lakh under the Black Money Act for failure to disclose foreign assets
• The return becomes defective if Schedule FA is required but not filled
• ITR-1 cannot be used; you must file ITR-2 or ITR-3

Fix: If you own even one share of a US company (through any platform), file ITR-2 and complete Schedule FA.

Mistake 14: Filing Under the Wrong Tax Regime

For FY 2025-26, the new tax regime is the default. If you want the old regime (with deductions under 80C, 80D, HRA, etc.), you must actively opt for it by filing Form 10-IEA before or along with your ITR.

Common confusion:

• Claiming Chapter VI-A deductions (80C, 80D) while filing under the new regime (not allowed; deductions will be disallowed during processing)
• Not filing Form 10-IEA when intending to use the old regime
• Salaried employees who told their employer to use old regime for TDS but then file ITR under new regime (or vice versa): this is allowed, but the tax computation will differ from Form 16

Fix: Decide your regime before filing. Use a tax calculator to compare liability under both regimes. If choosing old regime, ensure Form 10-IEA is filed.

Mistake 15: Not Paying Self-Assessment Tax Before Filing

If your total tax liability exceeds TDS already deducted and advance tax already paid, you owe self-assessment tax. Filing an ITR without paying this is not invalid, but the processing system will add interest under Section 234B and 234C automatically.

Why it matters:

• Interest under Section 234B: 1% per month on unpaid tax
• Interest under Section 234C: 1% per month for shortfall in advance tax instalments
• If the unpaid amount is large, you may receive a demand notice under Section 143(1)

Fix: Calculate your total liability using the tax computation in your ITR. Pay any shortfall via Challan 280 (available on the income tax portal under e-Pay Tax). Enter the challan details in your ITR before submitting.

What to Do If You Already Made a Mistake

File a Revised Return

Under Section 139(5), you can file a revised return for AY 2026-27 before December 31, 2026 (or before the completion of assessment, whichever is earlier). There is no penalty for revising your return.

Respond to Defective Return Notice

If you receive a notice under Section 139(9), you have 15 days to correct the defect. Log in to incometax.gov.in, go to "Pending Actions" > "Response to Defective Notice," and submit the corrected data.

Respond to Section 143(1)(a) Intimation

This is an automated adjustment notice. The department has recomputed your tax based on their records. Review the intimation carefully:

• If you agree, pay the demand
• If you disagree, file a rectification request under Section 154

Timeline Summary for AY 2026-27

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This guide is based on the Income Tax Act 1961, Finance Act 2025 amendments, CBDT circulars, and procedural rules applicable to AY 2026-27 (FY 2025-26 income). Key facts verified against incometax.gov.in, ClearTax, Tax2win, and Bajaj Finserv reference documentation. Tax rules are subject to amendments; always confirm with the official income tax portal or a qualified professional before acting.