Ensure accurate ITR filing information

Ensure accurate ITR filing information

Filing an Income Tax Return that holds up to CBDT scrutiny is not a July ritual — it is the outcome of twelve months of disciplined record-keeping and a systematic pre-filing review. For AY 2026-27 (income earned in FY 2025-26), the stakes are higher than in any prior year: the CBDT's data-matching engine cross-checks your ITR against the Annual Information Statement (AIS), Form 26AS, GSTN data and Statement of Financial Transactions (SFT) submissions from banks and brokers within minutes of upload. An un-reconciled mismatch no longer waits for a human officer — it auto-generates a defect notice under Section 143(1)(a). This guide gives you the concrete, step-by-step process to get every number right before you click Submit.

Why AY 2026-27 Is a Particularly High-Stakes Filing Year

Three converging changes make AY 2026-27 the most technically demanding filing year in recent memory.

The new tax regime is the default. Finance Act 2025 retained the new regime as the opt-out-required default. If you do nothing, the system will apply the new regime to your return. To claim deductions under the old regime, you must affirmatively choose it — and salaried taxpayers have one last chance to switch in their ITR even if their employer defaulted to the new regime.

Budget 2025 revised the new-regime slabs and enhanced the Section 87A rebate. For AY 2026-27, the rebate under Section 87A has been enhanced so that a resident individual's income up to Rs. 12 lakh (Rs. 12.75 lakh for salaried employees after the Rs. 75,000 standard deduction) attracts zero net tax liability after the rebate. The precise slab structure and rebate quantum are as notified in Finance Act 2025; confirm the exact figures before computing.

Capital gains rules changed mid-year. Budget 2024 (effective 23 July 2024) raised the LTCG tax on listed equity and equity-oriented mutual funds from 10% to 12.5% under Section 112A, and the STCG rate under Section 111A from 15% to 20%. The Rs. 1 lakh annual LTCG exemption under Section 112A remains. Any equity or equity-fund sale made on or after 23 July 2024 and reported in your FY 2025-26 return carries the new rates.

With these changes, a return filed on memory and estimates is almost certain to be defective.

Step 1: Download AIS and TIS Before You Open Any Form

The Annual Information Statement (AIS) and the Taxpayer Information Summary (TIS) are your ground truth. Both are available at incometax.gov.in → AIS tab after logging in with your PAN credentials.

What to do, in order:

1. Download the full AIS (PDF or JSON). It will list salary reported by your employer, bank interest, dividend credits, securities transactions, mutual fund redemptions, property registrations, GST turnover, foreign remittances and more — sourced from 50+ reporting entities.
2. Download the TIS. This is a deduplicated, consolidated view: where two entities have reported the same transaction (for example, both a broker and a stock exchange reporting the same equity trade), the TIS shows one processed value.
3. Cross-check every TIS line against your own records: salary slips, bank statements, broker contract notes, dividend statements, property sale deed.
4. Where an entry is wrong — a transaction under your PAN that belongs to a joint account where you are the secondary holder, or an inflated interest figure from a bank error — submit AIS feedback directly on the portal. Select the transaction → choose the appropriate reason (e.g., Income is of another person, Amount is incorrect, Duplicate information) → save. Your feedback is timestamped. You can file your return with the correct amount even if the reporting entity has not yet confirmed the correction; retain the feedback acknowledgement as your audit trail.

The critical insight: Section 143(1)(a) allows the CPC to raise a prima facie adjustment for income reported in AIS but not in your ITR. Submitting feedback before filing converts a potential notice into a documented difference. The absence of feedback, combined with an unexplained divergence, is what triggers demands.

Step 2: Reconcile Form 16 and Form 26AS Line by Line

Your employer's Form 16 is the starting document for salary income. Part A shows TDS deposited against your PAN; Part B shows the detailed computation of total income. Both must reconcile precisely with the TDS credit in Form 26AS (Part A) and in the AIS.

The reconciliation sequence:

• Gross salary in Form 16 Part B → enters Schedule S of the ITR. Do not enter net-of-perquisite salary.
• TDS deducted in Form 16 Part A → verify against Form 26AS Part A and the AIS. If a TDS challan shows status "U" (unmatched), contact your employer's payroll team immediately. An unmatched challan will not give you TDS credit at the CPC.
• HRA exemption — verify the city (metro vs. non-metro determines the 50% or 40% threshold), actual rent paid per month, and the landlord's PAN if annual rent exceeds Rs. 1,00,000. If your employer computed HRA wrong in Form 16, recalculate the Section 10(13A) exemption yourself and report the correct figure.
• Standard deduction: Rs. 75,000 under the new regime; Rs. 50,000 under the old regime for AY 2026-27.
• Perquisites (company car, accommodation, ESOP vesting): cross-check Form 12BA values against Form 16 Part B.

If you changed jobs in FY 2025-26: You have two Form 16s. Combine them into a single Schedule S. The critical risk is that your second employer may not have accounted for income from the first employer when estimating TDS deductions. If the combined TDS is short, interest under Sections 234B and 234C will apply. Compute the consolidated salary income yourself and check whether advance tax was required.

Step 3: Capture Every Income Stream — Nothing Is Too Small

The AIS records income sources that many taxpayers overlook or under-report. The CBDT's cross-check will find them.

Interest income:

• Savings bank interest from every account, including salary accounts, NRO accounts and dormant accounts. Aggregate all SB interest and claim the Section 80TTA deduction of up to Rs. 10,000 only if you are in the old regime — the deduction is not available under the new regime.
• Fixed deposit interest is taxable in the year it accrues, not when the FD matures. If your bank deducted TDS at 10% and your slab rate is 30%, you owe additional tax. The TDS is a credit, not a final settlement.
• A frequently missed item: interest on income-tax refunds paid by the CPC. That interest is taxable in the year of receipt.

Dividend income: Dividends are fully taxable at slab rates in the recipient's hands — the era of the dividend distribution tax exemption is over. Dividends appear in the AIS by company name and amount. Match each credit against your bank statement. Do not rely solely on the broker's consolidated statement; some dividend warrants are credited directly by the registrar and may not appear in your broker's year-end summary.

Capital gains: Report separately under Schedule CG. For equity and equity-oriented mutual funds: LTCG above Rs. 1 lakh at 12.5% under Section 112A (for sales on or after 23 July 2024); STCG at 20% under Section 111A. For debt mutual funds purchased on or after 1 April 2023, gains are taxable at slab rates regardless of holding period — no indexation, no LTCG treatment.

Crypto and VDA: Flat 30% tax under Section 115BBH on all gains. TDS at 1% under Section 194S from the exchange is a credit — your actual tax liability is 30% on each gain, computed trade by trade. Losses on one VDA cannot be set off against gains on another VDA, or against any other income head. Do not net them.

Rental income: Report gross annual rent under income from house property. Deduct municipal taxes actually paid during the year. Then apply the 30% standard deduction under Section 24(a) on the net amount. Report the gross figure first — the portal will apply the deductions in the computation; do not enter net rent directly.

Step 4: Choose the Correct ITR Form

Selecting the wrong form does not merely trigger a defect — it can render the return invalid if the error is material.

Traps that force salaried filers off ITR-1:

• You received ESOP shares that vested during FY 2025-26 and subsequently sold them → capital gains → ITR-2.
• You sold residential property → capital gains → ITR-2.
• You are a director in any company, including a dormant one → ITR-2.
• You hold foreign shares, a foreign bank account, or are a beneficiary of a foreign trust → ITR-2, with Schedule FA and Schedule FSI mandatory.

Step 5: Compare Both Tax Regimes Before You Choose

The new regime has lower slab rates but strips most deductions. The old regime preserves your deductions but applies steeper rates to the remaining income. Neither regime is universally better. You must compute both.

Under the new regime, you give up: Section 80C, 80D, HRA exemption under Section 10(13A), LTA under Section 10(5), 80TTA/80TTB, and Section 24(b) deduction on home loan interest for self-occupied property.

Under the new regime, you keep: Standard deduction of Rs. 75,000, employer NPS contribution deduction under Section 80CCD(2), and gratuity/leave encashment exemptions.

The practical break-even: If your total eligible deductions (80C + 80D + HRA + home loan interest + 80TTA) exceed roughly Rs. 3.75–4.00 lakh, the old regime is worth computing seriously. The Section 24(b) deduction for home loan interest (up to Rs. 2,00,000 on self-occupied property) is the single largest swing factor.

Worked Example: Two Colleagues, Same Salary, Different Outcomes

Arjun and Sneha both earn Rs. 15,00,000 gross salary in FY 2025-26. Both live in Mumbai.

Arjun has no home loan. His deductions: 80C Rs. 1,50,000 + 80D Rs. 25,000 + HRA Rs. 1,80,000.

• Old regime: Net income after standard deduction Rs. 50,000, HRA Rs. 1,80,000, 80C Rs. 1,50,000, 80D Rs. 25,000 = Rs. 10,95,000 taxable income. Tax + 4% cess ≈ Rs. 1,49,600.
• New regime: Net income after standard deduction Rs. 75,000 = Rs. 14,25,000 taxable income. Tax + 4% cess ≈ Rs. 97,500.
• Arjun saves approximately Rs. 52,100 under the new regime.

Sneha has a home loan with Section 24(b) interest of Rs. 2,00,000. Her deductions: same as Arjun, plus Rs. 2,00,000 home loan interest.

• Old regime: Net taxable income = Rs. 10,95,000 − Rs. 2,00,000 = Rs. 8,95,000. Tax + cess ≈ Rs. 97,560.
• New regime: Same as Arjun — Rs. 97,500.
• For Sneha, the difference is negligible (≈ Rs. 60). But if Sneha's annual interest grows to Rs. 2,50,000 — which is common in the second or third year of a large loan — the old regime saves her approximately Rs. 15,600.

Lesson: Do not assume. For incomes between Rs. 10 lakh and Rs. 20 lakh with significant deductions, the crossover point can shift by tens of thousands of rupees depending on just one variable. Use the comparison tool on the income-tax portal or a structured spreadsheet — not intuition.

Common Mistakes That Attract CBDT Notices

1. Reporting interest from only your "main" account. The AIS aggregates interest from every bank account linked to your PAN, including salary accounts, NRO accounts and accounts opened years ago. A Rs. 2,500 SB interest entry from a dormant account that does not appear in your ITR is an automatic defect flag.

2. Treating mutual fund switches as non-taxable events. Switching from Fund A to Fund B is a redemption of Fund A followed by a fresh purchase of Fund B. It triggers capital gains — short-term or long-term depending on the holding period — even though no cash leaves your account. The AIS will show the switch as a redemption. If your ITR does not show the corresponding gain, expect a mismatch notice.

3. Missing Form 10E before claiming Section 89(1) relief. If you received salary arrears or advance salary in FY 2025-26, you may be entitled to relief under Section 89(1) to reduce the bunching effect on your tax liability. However, you must file Form 10E on the income-tax portal before submitting your ITR. If you claim the relief in the ITR without the prior Form 10E filing on record, the CPC will reject the claim and raise a demand for the difference.

4. Claiming old-regime deductions without actively opting out of the new regime. The new regime is the default. If your ITR is filed under the new regime — either because you did not select the old regime or because your pre-filled ITR defaulted — all old-regime deductions (80C, 80D, HRA, Section 24(b)) will be disallowed without a notice, simply because they are inapplicable to the regime selected. Verify the regime flag in your ITR before submitting.

5. Ignoring the joint account rule in AIS. If you are a secondary holder on a joint FD, the bank may have reported the entire interest under your PAN. The AIS entry will appear in your statement, but the income belongs to the primary holder. Submit AIS feedback before filing and ensure the primary holder reports the income in their return.

Special Cases That Trip Up Even Experienced Filers

Gifts above Rs. 50,000 from non-relatives. A cash gift of Rs. 60,000 from a friend is taxable under Section 56(2)(x) as income from other sources. Gifts from specified relatives (spouse, parents, siblings, lineal descendants) are exempt regardless of amount. Wedding gifts from any source are also exempt. The common mistake is treating all gifts as exempt.

Section 43B(h) — MSME payment disallowance. If you run a business and have not paid a Micro or Small Enterprise within the prescribed timeline (15 days for those without a written agreement; 45 days with one), the deduction for that expense is disallowed in FY 2025-26 and moves to the year of actual payment. Many business taxpayers have missed this entirely.

Foreign assets and income. Holding a foreign bank account, foreign securities, immovable property outside India, or being a beneficial owner of a foreign entity makes Schedule FA and Schedule FSI mandatory in your ITR — regardless of whether any foreign income was earned during the year. The penalty for non-disclosure of foreign assets under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 is Rs. 10 lakh per year of non-disclosure.

After You Submit: Verification, Intimation and Corrections

E-verify within 30 days of filing — not 30 days from the due date. The clock starts from the date you filed, not from 31 July 2026. An unverified return is treated as if never filed; late fees and interest continue to accrue. Aadhaar OTP is the fastest method. Net banking, pre-validated bank account, Demat account, and physical ITR-V dispatch to CPC Bengaluru are alternatives.

Read the Section 143(1) intimation carefully. The CPC typically processes non-scrutiny returns within 3–6 weeks. The intimation will show either (a) no demand, (b) a refund, or (c) a demand. If the intimation shows a demand arising from a TDS credit mismatch or arithmetic difference, you have two paths: pay if it is correct, or file a rectification under Section 154 from the portal (Services → Rectification) if it results from a data error.

Belated and revised returns. Missed 31 July 2026? You may file a belated return under Section 139(4) up to 31 December 2026. A late fee of Rs. 5,000 (or Rs. 1,000 if total income ≤ Rs. 5 lakh) applies under Section 234F, plus interest at 1% per month under Section 234A on unpaid tax from the original due date. Found an error in an already-filed return? File a revised return under Section 139(5) at any time before 31 March 2027 (the end of AY 2026-27) or before the completion of assessment — whichever is earlier.

Key Takeaways

• AIS reconciliation is Step Zero, not an afterthought. The system will compare your ITR to the AIS automatically. Resolve every mismatch before filing, not in response to a notice.
• Form 16 Part A must match Form 26AS Part A to the rupee. An unmatched challan blocks your TDS credit and creates a demand that requires a Section 154 rectification to resolve.
• No income is too small to report. SB interest from a dormant account, a Rs. 500 dividend, a mutual fund switch gain — the AIS will show it. Your return must too.
• ITR form selection is a compliance decision, not a preference. Capital gains, foreign assets, or a company directorship all disqualify you from ITR-1. Start with the eligibility checklist before you start filling the form.
• Run both regime calculations with your actual deduction numbers. For most salaried filers between Rs. 10–20 lakh income, the break-even is determined by one variable: the size of the home loan interest deduction.
• E-verify within 30 days of the filing date — the countdown starts the moment you submit, not on 31 July.
• Section 139(5) is your safety net. A revised return filed promptly, before you receive a notice, demonstrates good faith and eliminates most defect risk.