8 Common Mistakes to Avoid in Tax Return Filing Season 2026

Filing your Income Tax Return (ITR) is more than a yearly compliance task — it’s an opportunity to review your finances, claim rightful refunds, and plan better for the future. For individuals aged 25 to 55, who are typically in their prime earning years with responsibilities like home loans, children’s education, retirement planning, and family protection, getting taxes right matters a lot.

As of 2026, the Income Tax Department has reported continued growth in filings. Previous years saw over 9 crore returns filed, with expectations of further increase due to better digital infrastructure and awareness. The deadline for filing ITR for Assessment Year (AY) 2026-27 (Financial Year FY 2025-26) is 31st July 2026 for most non-audit individual taxpayers (ITR-1 and ITR-2). Business or profession cases without audit have until 31st August 2026.

This guide covers 8 key mistakes to avoid, with simple explanations, tips, and ways smart financial tools like term plans, ULIP plans, and investment plans can support your overall financial health (while staying tax-efficient where possible).

8 Mistakes to Avoid This Tax Return Filing Season

1. Failing to Reconcile Form 16 with AIS and TIS

Many salaried professionals assume that their job is complete once they receive Form 16 from their employer. This is a costly misconception. Your AIS tracks all financial footprints—including stock trades, mutual fund redemptions, crypto transactions, and dividend payouts. If you rely solely on Form 16 and omit small investment streams, the tax department's automated algorithms will flag the under-reporting. Always reconcile your data before hitting submit.

2. Misreporting Deductions on Investment Plans & ULIPs

Claiming deductions under Sections 80C or 10(10D) requires strict alignment with current rules. ULIP plans (Unit Linked Insurance Plans) offer a powerful mix of investment and safety, but if the annual aggregate premium across your ULIPs exceeds ₹2.5 lakh, the maturity proceeds lose their tax-exempt status. For traditional investment plans or a guaranteed return plan, ensure you only claim valid components and hold onto your premium receipts as solid proof.

3. Forgetting to Report Savings and FD Interest Income

Even a minor amount of interest earned on your secondary savings account or a fixed deposit must be reported under "Income from Other Sources." Financial institutions report these earnings directly to the IT department. Omitting a small ₹2,000 interest entry is one of the most common reasons clean tax profiles get flagged for automated mismatch notices.

4. Overlooking Term Insurance Deductions

An online term insurance policy is the foundation of a sound financial safety net. If you have secured a 1crore term insurance policy to safeguard your family's future, ensure you claim the premium under Section 80C. When choosing a comprehensive term plan, buying online is often more cost-effective, and saving the digital receipt ensures you have explicit documentation during tax filing.

5. Selecting the Wrong ITR Form

Choosing the wrong Income Tax Return (ITR) form automatically invalidates your submission or invites a defect notice. For instance, while a simple salaried individual uses ITR-1, you cannot use it if you hold foreign assets, have crypto transactions, hold unlisted shares, or participate in Futures & Options (F&O) trading. Ensure your specific income streams align perfectly with the designated ITR form.

6. Claiming Fake or Unbacked Exemptions

The tax department has significantly tightened scrutiny on House Rent Allowance (HRA) claims and political donations. If you claim HRA by paying rent to parents, a legal rent agreement and bank transfer footprints are essential. For donations under Section 80G, the system now requires additional specifics, including the transaction reference number and the recipient's PAN. Never claim a deduction you cannot back up with hard evidence.

7. Quoting the Wrong Assessment Year (AY)

When completing your forms this season, remember that the correct Assessment Year is 2026-27 for the income earned during the Financial Year 2025-26. Selecting the incorrect year on the portal can complicate your tax timeline, trigger unnecessary penalties, or result in double taxation.

8. Entering Flawed Bank Details for Your Refund

If you are eligible for a tax refund, double-check your bank account number and IFSC code. A single transposed digit will cause a processing failure. Under modern banking protocols, your bank account must also be pre-validated on the e-filing portal and linked directly to your PAN to receive credit.

Quick Comparison of Common Deduction Options (Old Regime)

Key Takeaways

• Start early but not too early — gather documents methodically.

• Double-check everything — use portal tools to minimize errors.

• Plan holistically — Taxes are part of bigger financial goals like retirement, children's education, and family protection.

• Leverage insurance wisely — Products like term plan, 1 crore term insurance, or ULIP plans offer protection + potential investment growth. Online term insurance is convenient and affordable for this age group.

• Stay updated with IRDAI guidelines on insurance products for better transparency and customer protection.