8 Costly Mistakes to Avoid While Filing Your ITR This Year (FY 2025-26)

We are officially in the thick of tax season. With the July 31st deadline right around the corner for salaried employees and investors, millions of Indians are rushing to the Income Tax portal to file their returns.

But rushing is exactly how expensive mistakes happen.

The Income Tax Department's AI systems are smarter than ever in 2026. A simple copy-paste error, picking the wrong form, or forgetting a minor bank account can trigger an instant tax notice. What is worse? Some of these mistakes can result in hefty penalties or cause you to lose out on thousands of rupees in tax refunds.

At VJR Advisory Group, our Chartered Accountants review hundreds of defective returns every year. Before you hit "Submit" on your Income Tax Return (ITR) for FY 2025-26, make sure you are not making these 8 common blunders.

1. Blindly Relying on Form 16 (Without Checking AIS) 📊

Your HR department hands you a Form 16, and you assume it contains your entire financial life. This is the biggest mistake you can make today.

Form 16 only contains what your employer knows about. It does not include the interest you earned on your savings account, the mutual funds you sold, or that freelance gig you did on the side.

The Fix: Before filing, you must download your Annual Information Statement (AIS) from the tax portal. The government already knows about your stocks, dividends, and high-value transactions. If your ITR does not match your AIS exactly, you are guaranteed to get a notice.

2. Choosing the Wrong ITR Form 🗂️

Filing the wrong form invalidates your entire return. The Income Tax Department will send you a "Defective Return" notice under Section 139(9), giving you just 15 days to fix it.

Here is where most people go wrong:

• Mistake: A salaried employee who made a ₹500 profit selling mutual funds files ITR-1.
• Reality: Even ₹1 of capital gains disqualifies you from ITR-1. You must file ITR-2.
• Mistake: A freelancer trying to claim presumptive taxation files ITR-3 instead of ITR-4.

The Fix: Double-check your income sources. If you have capital gains, you need ITR-2. If you have business or professional income, you need ITR-3 or ITR-4.

3. Not Declaring "Exempt" Income 🛡️

Many taxpayers believe that if an income is tax-free, the government doesn't need to know about it. This is a dangerous myth.

For example, the interest you earn on your PPF (Public Provident Fund) or your EPF is tax-free. Agricultural income up to a certain limit is tax-free. However, the law strictly requires you to report these figures under the "Exempt Income" schedule in your ITR.

The Fix: Dig out your PPF passbook and EPF statements. Declare the interest earned, even if it doesn't add a single rupee to your tax bill. Transparency keeps you off the audit radar.

4. Treating F&O Trading as "Capital Gains" 📉

If you dabble in Futures and Options (F&O) or Intraday trading, listen closely: This is not considered a Capital Gain.

Countless DIY filers try to shove their F&O profits or losses into ITR-2 under Capital Gains. The Income Tax Department considers F&O as "Non-Speculative Business Income," and Intraday trading as "Speculative Business Income."

The Fix: You must file ITR-3. The silver lining is that since you are considered a "business," you can claim your internet bills, trading software costs, and brokerage as deductible business expenses!

5. Mishandling a Job Change (Multiple Form 16s) 🏢

Did you switch jobs midway through the financial year? If so, you likely have two Form 16s.

A massive mistake people make is only filing taxes using the Form 16 from their current employer. Because both employers likely gave you the basic exemption limit and standard deduction, you have likely paid much less tax than you actually owe.

The Fix: You must consolidate the gross salary and TDS from both employers into a single ITR. Be prepared to pay a bit of self-assessment tax, as the combined income will likely push you into a higher tax bracket.

6. Sticking to the Old Tax Regime Out of Habit ⚖️

For FY 2025-26, the New Tax Regime is the default system. Yet, out of pure habit, many taxpayers manually switch back to the Old Regime without doing the math.

If you don't have a home loan (Section 24b) or pay high rent (HRA), the New Regime is almost always better. Under the New Regime, a salary of up to ₹7.75 Lakhs is completely tax-free (thanks to the ₹75,000 standard deduction and Section 87A rebate).

The Fix: Stop guessing. Calculate your taxes under both regimes before filing. If your total deductions (80C, 80D, HRA) are less than ₹2.5 Lakhs to ₹3 Lakhs, the New Regime will likely save you more cash.

7. Forgetting to Carry Forward Losses 📉

Nobody likes losing money in the stock market. But if you suffered capital losses or F&O losses this year, your ITR is your best friend.

Many people simply ignore reporting their losses because they don't owe tax on them. But if you report them correctly and file on time, the government allows you to "carry forward" these losses for up to 8 years to offset future profits!

The Fix: Download your broker's Tax P&L statement. Report every loss. However, remember that you permanently lose this carry-forward benefit if you miss the July 31st deadline and file a Belated Return.

8. The Fatal Flaw: Forgetting to E-Verify 🚨

You logged in, filled out the form, hit "Submit," and logged out. You are done, right? Wrong.

Under the law, an unverified return is an invalid return. It is as if you never filed at all. The Income Tax Department recently slashed the time limit for e-verification from 120 days to just 30 days from the date of submission.

The Fix: The moment you hit submit, immediately choose "e-Verify using Aadhaar OTP." It takes two seconds. Once you see the green success message, your filing is officially complete.

Stop Guessing. Let VJR Advisory Group Handle It.

Income tax rules change every year, and the cost of making a mistake is higher than ever. From choosing the wrong tax regime to triggering an AIS mismatch, DIY tax filing is a risky game.

With the deadlines closing in, you need precision and peace of mind. At VJR Advisory Group, our CA experts meticulously reconcile your Form 16, AIS, and broker statements to ensure a flawless, notice-proof filing that maximizes your legal refunds.