The Income Tax Return (ITR) filing season for Assessment Year (AY) 2026-27 is underway. Yet, many taxpayers continue to approach ITR filing with certain misconceptions. Some believe that the word “return” in Income Tax Return is synonymous with “refund” and expect that filing an ITR will invariably result in a tax refund. Others, particularly salaried employees, view ITR filing as a mere procedural formality because tax has already been deducted by their employer through Tax Deducted at Source (TDS).
Both assumptions are misplaced.
In today’s data-driven compliance environment, filing an ITR is no longer limited to reporting income or claiming a refund. The return should present a complete and accurate picture of the taxpayer’s income and tax position and be capable of withstanding automated validation and verification checks.
Against this backdrop, taxpayers should pay particular attention to the following nine key checks before filing their ITR for AY 2026-27.
1. Choose the correct ITR form
The ITR filing process begins with selecting the appropriate return form. Simplified forms such as ITR-1 (Sahaj) and ITR-4 (Sugam) are designed to facilitate compliance for eligible taxpayers; however, their use is subject to specific eligibility conditions.
The applicable ITR form depends on various factors, including the category of taxpayer, quantum of income, nature and source of income, residential status, and whether the taxpayer intends to carry forward losses.
For instance, ITR-1 can now be used by an individual having income from up to two house properties. However, if the taxpayer wishes to carry forward a loss under the head “Income from House Property”, ITR-1 cannot be used.
Similarly, even where the total income of an individual does not exceed Rs 50 lakh, the presence of foreign income may render the taxpayer ineligible to file ITR-1 or ITR-4, despite satisfying the other eligibility conditions.
Many taxpayers tend to select the simplest form available without carefully verifying whether they are eligible to use it. This can prove costly. An incorrect form may render the return defective, and if the defect is not rectified within the prescribed time, the return may ultimately be treated as invalid.
The taxpayer may then be required to file a fresh return in the correct form. If this occurs after the due date, the return would effectively become a belated return, potentially resulting in the loss of certain tax benefits, including tax regime options that are required to be exercised on or before the due date prescribed under section 139(1). In addition, the taxpayer may become liable for late filing fees and applicable interest.
Selecting the correct ITR form is, therefore, the first and perhaps the most important check before proceeding with the return filing process.
2. Reconcile AIS and pre-filled ITR data
One of the most important compliance exercises in a data-driven tax environment is reconciliation.
Taxpayers should reconcile the information appearing in the Annual Information Statement (AIS), Form 26AS, Form 16, Form 16A and the pre-filled ITR data with their own financial records before filing the return.
Discrepancies may arise due to reporting errors, timing differences, incorrect PAN reporting, duplication of entries or omission of transactions. Where inaccurate information is reflected in AIS, taxpayers should consider providing appropriate feedback and, wherever possible, seek correction before filing the return.
In a data-driven compliance environment, reconciliation before filing the ITR is an essential step in ensuring the accuracy and completeness of income reporting. It helps taxpayers identify omissions, duplications and reporting errors, thereby reducing the risk of under-reporting or over-reporting of income and the consequent underpayment or excess payment of taxes.
Both under-reporting and over-reporting of income can prove to be costly. While under-reporting may lead to tax demands, interest, penalties and other compliance consequences, over-reporting may result in avoidable tax outgo and financial loss to the taxpayer.
3. Report all income under the correct heads
The increasing availability of pre-filled data has created a tendency among some taxpayers to rely entirely on the information already populated in the return. However, merely because a particular item of income does not appear in the Annual Information Statement (AIS) or the pre-filled return does not absolve the taxpayer from the obligation to report it.
Taxpayers must ensure that all income chargeable to tax is disclosed in the return and reported under the appropriate head of income prescribed under the Income-Tax Act, 1961.
Particular care should be taken while reporting income against which tax has been deducted at source (TDS). In certain cases, the nature of income reported by the deductor in the TDS return may differ from the manner in which the taxpayer is required to report the income in the ITR.
For example, a receipt reported by the deductor may appear in the TDS schedule as professional income, whereas the taxpayer may be required to report it under a different head based on the true nature of the receipt.
In such cases, taxpayers should appropriately report the income under the correct head and ensure that the corresponding TDS credit is linked to the relevant income in the TDS schedules of the ITR. This helps establish a clear correlation between the income reported and the TDS claimed and reduces the likelihood of mismatch-related compliance queries.
4. Report exempt income
While exempt income may not be taxable, it often remains reportable. Failure to disclose exempt income can create gaps between a taxpayer’s financial profile and the income reported in the return, potentially resulting in avoidable compliance queries.
Consider the case of an individual who retired during FY 2025-26 and received exempt retirement benefits such as gratuity, leave encashment and commuted pension aggregating to Rs 1.60 crore. Assume that the individual’s taxable salary and pension income for the year amounted to only Rs 15 lakh, while exempt retirement benefits aggregated to Rs 1.60 crore and that the retirement benefits were subsequently invested in the purchase of a residential house, a transaction reportable under the Statement of Financial Transactions (SFT) framework.
If the taxpayer discloses only the taxable income of Rs 15 lakh in the return and fails to report the exempt receipts, the investment may appear disproportionate to the income disclosed in the ITR. Such a mismatch may attract compliance queries seeking an explanation regarding the source of funds used for the investment.
In such cases, taxpayers should also ensure that exempt retirement benefits are appropriately reflected by the employer in Form 16, wherever required. Consistency between Form 16 and the disclosures made in the ITR helps minimise the risk of data mismatches and avoidable compliance queries.
Comprehensive reporting of exempt income enhances transparency, provides a more complete picture of the taxpayer’s financial affairs and reduces the likelihood of unnecessary notices or inquiries at a later stage.
5. Claim only eligible exemptions and deductions
Over the years, the ITR forms have been redesigned to capture increasingly granular information relating to exemptions and deductions. Taxpayers are now required to furnish detailed particulars in respect of various claims, including deductions under Chapter VI-A, interest on housing loan, capital gain exemptions and exemptions claimed under Section 10 of the Income-Tax Act. These enhanced disclosure requirements enable the Income Tax Department to cross-check such claims more effectively and strengthen the overall compliance framework.
Taxpayers should therefore ensure that every exemption or deduction claimed is legally admissible and supported by adequate documentation.
Incorrect claims may not only trigger tax notices but also result in additional tax and interest liability. In appropriate cases, they may further attract penalty proceedings. Depending on the nature and circumstances of the default, the penalty can be substantial and may extend up to 200% of the tax payable on the wrong claim.
6. Validate and update refund bank account details
Before filing the return, taxpayers should ensure that the bank account intended for receiving refunds has been validated on the income tax portal and remains active and operational. Refund processing may be delayed or unsuccessful if the validated account has been closed or is otherwise inoperative at the time the refund is issued.
Taxpayers should also verify that the account number and other banking particulars reflected on the portal are accurate and up to date, particularly where bank accounts have been changed or closed during the year.
A simple review of bank account details before filing can help avoid unnecessary delays in receiving refunds and the subsequent effort involved in updating records after the return has been processed.
7. Review the return carefully before submission
Many filing errors occur not because taxpayers lack information but because they fail to review the completed return carefully before submission.
Before filing the return, taxpayers should verify the accuracy and completeness of all key disclosures, including:
- Personal particulars such as address, mobile number and email ID;
- Bank account details and refund account validation status
- Nature of employment in the case of salaried employees and pensioners, as eligibility for certain exemptions and deductions may depend upon the category selected;
- Income reported under each head of income;
- TDS credits, advance tax, self-assessment tax and other tax payments reflected in the return;
- Exemptions and deductions claimed;
- Carry-forward and set-off of losses, wherever applicable; and
- The final computation of total income, tax payable or refund due.
A comprehensive review before submission often helps identify errors that may otherwise trigger processing delays, compliance alerts or tax notices.
8. File the return within the due date
Timely filing of the ITR has always been important, but its significance has increased in the context of tax regime selection and broader compliance requirements.
For taxpayers who do not have income from business or profession, the option to opt out of the default new tax regime and choose the old tax regime can be exercised while filing the return, provided the return is furnished within the due date prescribed under Section 139(1). Missing the due date may affect the taxpayer’s ability to exercise this option and could result in a significantly higher tax liability.
In addition, delayed filing may attract late filing fees, interest liability and other adverse consequences under the Income-Tax Act. It may also impact the availability of certain benefits that are contingent upon filing the return within the prescribed time.
Taxpayers should therefore view the due date not merely as a filing deadline but as an important compliance milestone that can influence both their tax liability and overall compliance position.
9. Complete ITR verification within the prescribed time
Filing the ITR is only one part of the compliance process. The return must also be verified within the prescribed time limit, failing which the filing process remains incomplete.
Many taxpayers assume that once the return has been uploaded, their compliance obligation is over. However, an ITR that is not verified within the prescribed period (currently 30 days from the date of filing) is treated as invalid. In the eyes of the law, it is as if no return had been filed at all.
The consequences can be significant. The taxpayer may lose the benefits available to a valid return filed within the due date, including the ability to exercise certain tax positions and options, such as the choice of tax regime where timely filing is a statutory requirement. Further, where the due date for filing the return has already expired, the taxpayer may also be exposed to the consequences associated with non-filing or belated filing of the return.
Taxpayers should therefore ensure that the verification process, whether through Aadhaar OTP, net banking, Electronic Verification Code (EVC), digital signature or any other prescribed mode, is completed within the stipulated timeline after submission of the return.
In a data-driven compliance environment, filing and verification are two integral parts of a single process. A return that is filed but not verified is, for all practical purposes, no return at all
Filing right matters more than ever
The shift towards non-invasive, data-driven compliance checks has fundamentally changed the way taxpayers should approach return filing. Today, the Income Tax Department has access to vast amounts of information from employers, banks, financial institutions, registrars, stock exchanges, mutual funds and other reporting entities. The integration and analysis of this information enable the department to identify potential mismatches, omissions and inconsistencies in taxpayer disclosures with increasing accuracy.
The focus has shifted from merely filing a return to filing a return that is accurate, complete and capable of being reconciled with information available across the tax ecosystem.
In this environment, successful tax compliance is no longer measured simply by whether a return has been filed. It is measured by whether the return is complete, accurate, internally consistent and aligned with the information available across the broader tax ecosystem.
As taxpayers prepare to file their returns for AY 2026-27, focusing on these nine checks can help ensure smoother processing, faster refunds, reduced compliance risks and greater confidence that the return can withstand scrutiny in an increasingly data-driven tax administration framework.
The author, O.P. Yadav, is a former IRS officer with over 36 years of experience in tax administration, education, and training. He is presently associated with Prosperr.io as a Tax Evangelist. The views expressed are personal.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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