ITR Filing Mistakes to Avoid in FY 2025-26

Filing ITR-1 when you should be filing ITR-3 (for F&O income), or ITR-4 when you have capital gains - these result in defective return notices. The IT Department now has AIS data that shows exactly what income you earned. If the form does not match, you get flagged automatically.

Fix: Identify all income sources before choosing a form. Use the form selector on the IT portal or consult a CA before you start filling.

The Annual Information Statement at incometax.gov.in shows salary, interest, dividends, securities transactions, VDA transactions, GST turnover, property purchases - all pre-loaded from third-party reporting. If your ITR income does not match AIS data, the matching algorithm flags it automatically.

Fix: Download your AIS and Form 26AS before filing. Cross-check every line item and reconcile discrepancies before submitting.

Savings account interest, fixed deposit interest, recurring deposit interest, and bond interest are all taxable as Other Sources income - and all appear in your AIS. Banks report interest paid to the IT Department.

Fix: Download bank statements and collect interest certificates from all banks. Report every rupee of interest income, even if small.

Submitting on the portal is not enough. You must e-Verify within 30 days of filing. An unverified return is treated as never filed - no refund, no acknowledgment, and the deadline is treated as missed for carry-forward purposes.

Fix: e-Verify immediately after submission using Aadhaar OTP. This takes under 2 minutes.

F&O income is NOT capital gains - it is non-speculative business income taxed at slab rates. Filing F&O under Schedule CG in ITR-2 results in a defective return or incorrect tax computation.

Fix: All F&O income must go in ITR-3 under Schedule BP. Get the turnover calculation right using your broker's Tax P&L report.

If you made an F&O loss in FY 2025-26 and file ITR-3 after 31 July 2026, you permanently lose the right to carry forward that loss. No exceptions. This can cost lakhs in future tax savings.

Fix: Mark 31 July 2026 in your calendar. Collect your broker's P&L report from April 2026. File early.

With AIS data from exchanges (Section 194S TDS reporting) and FIU-IND data, undisclosed VDA income is traceable. Over 44,000 notices have already been issued for FY 2022-23 cases. Filing without Schedule VDA when you have VDA transactions is high-risk.

Fix: Report all crypto transactions in Schedule VDA of ITR-2 or ITR-3. Use transaction histories from every exchange including foreign platforms.

Section 115BBH income (VDA) cannot be reported in ITR-1 or ITR-4. Filing in the wrong form will be treated as defective and you will receive a notice under Section 139(9).

Fix: Use ITR-2 (investors) or ITR-3 (traders) for any year where you had VDA transactions.

Using total contract value or net profit as F&O turnover - instead of the absolute sum of profits and losses - leads to incorrect audit applicability and wrong ITR data.

Fix: Use your broker's Tax P&L Report for the correct absolute turnover figure per the ICAI Guidance Note formula.

Section 87A rebate (up to Rs 60,000 for taxable income up to Rs 12 lakh in the new regime for FY 2025-26) does not apply to income taxed under Section 115BBH. Many small crypto investors claim this rebate incorrectly, resulting in a tax demand.

Fix: VDA income must be tax-computed at 30% separately - no rebate applies.

80C, 80D, 80E, 80G, HRA, home loan interest - many filers miss deductions because they do not have proofs handy while filing. Under the old regime, missed deductions mean paying more tax than necessary.

Fix: Collect all investment proofs before filing. Review last year's return to check for recurring deductions you may have forgotten.

An inoperative PAN means: cannot file ITR, TDS deducted at higher rates, refunds blocked, financial transactions above thresholds restricted.

Fix: Link PAN-Aadhaar immediately at incometax.gov.in. A late linking fee of Rs 1,000 applies.

Indian residents holding foreign bank accounts, foreign investments, foreign property, or crypto on foreign exchanges (above Rs 20 lakh) must declare these in Schedule FA. Non-disclosure invites penalties under the Black Money Act - which can be 3x the undisclosed amount.

Fix: Declare all foreign assets in Schedule FA. This is separate from Schedule VDA for crypto.

Many business owners and freelancers skip advance tax quarterly installments - and find interest charges of 1% per month under Sections 234B and 234C adding up to thousands when they finally file.

Fix: Estimate your annual tax liability in April. If it exceeds Rs 10,000, pay advance tax in four installments by 15 June, 15 September, 15 December, 15 March.

Portal congestion, missed documents, hasty data entry, and wrong form selection all happen when people rush to file in the last few days. The IT portal experiences heavy load in the last week of July every year.

Fix: Start filing by the end of June 2026. Most documents - Form 16, AIS, investment proofs - are available by then.

Regikart's CA team reviews your complete income profile, reconciles AIS, chooses the right form, claims every eligible deduction, and files on time - eliminating all these common mistakes in one step.

Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Tax laws may change. Please consult a qualified Chartered Accountant for advice specific to your situation.