7 Frequent ITR Filing Errors That Trigger Income Tax Notices & How To Avoid Them

Filing an Income Tax Return for FY 2025-26 may look simpler with pre-filled utilities and online data, but the same technology also makes discrepancies easier for the Income Tax Department to detect.

For FY 2025-26, the due dates are:

  • 31 July 2026 – for salaried assessees not subject to audit
  • 31 August 2026 – for non-audit businesses and professionals

With Annual Information Statement (AIS), Form 26AS and pre-filled ITR data, the department already has extensive information from banks, employers, mutual fund houses, registrars, and other reporting entities. Any inconsistency between that data and what the assessee declares in the ITR can quickly lead to notices, scrutiny, or queries.

Below are seven major reasons why an ITR may attract a notice, along with practical steps assessees can take before filing to reduce the risk.

1. Discrepancies Between AIS and Income Declared in ITR

What AIS Captures

AIS is now a comprehensive information statement that compiles almost all major financial transactions relating to an assessee, including:

  • Salary credited by employers
  • Interest from savings accounts and fixed deposits
  • Dividends from shares and mutual funds
  • Purchase or sale of securities and mutual fund units
  • High-value credit card spends
  • Cash deposits and withdrawals
  • Certain property transactions

This data is submitted directly by banks, intermediaries, companies, mutual fund registrars, and other reporting entities to the Income Tax Department.

Why Mismatch Leads to Notices

When an assessee files the ITR, the system cross-verifies income and transactions with the information already available in AIS and Form 26AS. If there are:

  • Income figures missing in the ITR
  • Amounts significantly different from AIS
  • Certain transactions not reflected at all

the return may get flagged for mismatch and could result in:

  • Automated email/SMS alerts
  • E-campaign communications seeking clarification
  • Formal notices for assessment or reassessment in serious cases

How to Avoid This

  1. Download and review AIS first

    • Log in to the e-filing portal and download AIS and Form 26AS before you start preparing the ITR.

  2. Reconcile differences

    • Check salary, interest, dividends, securities transactions, and high-value spending.
    • Match them with bank statements, Form 16, broker statements and investment records.

  3. Report and then explain, if needed

    • Even if you believe some AIS entries are inaccurate, do not ignore them.
    • Either correct AIS through the feedback option or disclose the item and explain in the schedules/notes as appropriate.

Note: The department is far more likely to ask questions where there is non-reporting, rather than where income is disclosed and then explained.

2. Capital Gains Not Reported or Partially Disclosed

Why Capital Gains Are Closely Tracked

Sale of shares, mutual fund units, bonds, and immovable property is routinely reported by:

  • Stockbrokers
  • Depositories
  • Mutual fund registrars
  • Sub-registrars for property transactions

Therefore, even if the assessee omits or under-reports these gains in the ITR, the transaction trail already exists in the department’s system.

Common Issues Observed

  • Reporting only some mutual fund redemptions and missing others
  • Ignoring small gains on equity share sales
  • Not disclosing sale of inherited or gifted property
  • Reporting sale value but not computing capital gains correctly

The department is less concerned with the size of the gain and more with the failure to report. Even modest capital gains may attract a notice if they are visible in AIS but missing from the ITR.

Best Practices to Avoid Notices