With the income tax return (ITR) filing season underway, taxpayers across the country have begun gathering Form 16 and other financial documents to file returns for Assessment Year 2026-27. However, tax professionals say filing returns can no longer be treated as a routine exercise.

The Income Tax Department is increasingly using artificial intelligence, data analytics and automated systems to compare information disclosed in returns with data received from employers, banks, brokers, mutual funds and other institutions. Experts warn that even minor mismatches or omissions could result in notices, delayed refunds or additional scrutiny.

Documentation and Data Reconciliation Are Crucial

Tax experts advise taxpayers to avoid claiming deductions that cannot be supported with proper documentation.

Mayank Mohanka, Founder of TaxAaram.com, told ET Wealth that House Rent Allowance (HRA) claims, especially where rent is paid to parents or relatives, should be backed by rent agreements, payment records and other supporting evidence. Such claims have attracted scrutiny in the past when the recipient failed to declare the rental income in their own returns.

Similar caution applies to donations and other deductions. Taxpayers should ensure they are able to substantiate every tax benefit claimed.

Archit Gupta, Founder and Chief Executive Officer of ClearTax, told ET Wealth that deduction claims under Section 80G now require more detailed disclosures, including transaction reference numbers and IFSC codes. Political donations may additionally require information such as the PAN of the political party.

Experts also caution against relying solely on Form 16 while preparing returns.

Sudhakar Sethuraman, Partner at Deloitte India, told ET Wealth that taxpayers often overlook smaller items such as interest from savings accounts, fixed deposits and dividends, as well as minor TDS entries.

“Even minor discrepancies can result in automated notices,” he said, adding that taxpayers should carefully review their Annual Information Statement (AIS) and submit feedback where any information appears incorrect.

AIS Errors and Wrong Return Forms Can Create Problems

While the AIS has become an important reference document, professionals say taxpayers should not assume that all information in it is accurate.

Shalini Jain, Tax Partner at EY India, told ET Wealth that duplicate entries, incorrect classifications and delayed reporting continue to create data quality issues.

As a result, taxpayers are advised to verify entries carefully instead of accepting pre-filled information without review.

Experts also stress the importance of selecting the appropriate return form.

Taxpayers with foreign assets, foreign income, multiple house properties or certain categories of capital gains may not be eligible to file ITR-1. Similarly, individuals involved in business activities or Futures and Options (F&O) trading may be required to use ITR-3.

Mohanka told ET Wealth that filing returns using the wrong form or omitting mandatory disclosures could invite avoidable scrutiny from the tax department.

Professionals further warn against ignoring seemingly insignificant income sources.

Interest earned on savings accounts, recurring deposits and fixed deposits, dividend income and capital gains are often already reported to the Income Tax Department by financial institutions.

Gupta told ET Wealth that discrepancies are easily detected through data matching involving banks, TDS statements, credit card transactions and other reporting channels.

Investors and Job Switchers Need Extra Attention

Investors are expected to face greater complexity this year following changes introduced in Budget 2024.

According to Sethuraman, taxpayers are required in some cases to distinguish between transactions carried out before and after July 23, 2024. Errors in classifying gains as short-term or long-term remain common.

He also noted that taxpayers frequently fail to take advantage of loss set-off and carry-forward provisions, leading to inaccurate tax calculations.

Experts recommend reconciling broker statements, mutual fund records and AIS data before filing returns.

Employees who changed jobs during the financial year are also advised to review their tax liability carefully.

Since previous and current employers generally calculate tax deductions independently, the total tax deducted at source may fall short of the actual liability.

Taxpayers should therefore consolidate salary income from all employers and compute their final tax obligation before filing, failing which they could face tax demands later.

Filing Alone Is Not Enough

Tax experts say many taxpayers overlook the final verification requirement after submitting returns.

Jain told ET Wealth that returns should be verified within 30 days to ensure they are treated as valid. Failure to do so could result in the return being considered invalid, effectively meaning it was never filed.

Experts also advise against waiting until the final days before the filing deadline, as last-minute submissions increase the chances of mistakes and leave little time for corrections.

According to Sethuraman, system-generated notices and alerts have risen significantly because information from multiple sources is now being cross-checked more aggressively.

With banks reporting interest income, employers reporting salaries and brokers and mutual funds sharing investment data, experts say taxpayers should spend time reconciling Form 16, AIS, Form 26AS and other records before filing.

They say a few extra minutes spent checking information could help taxpayers avoid lengthy explanations and unnecessary notices later.

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