ITR filing: 8 costly mistakes salaried employees should avoid to prevent tax notices and refund delays
ITR 2026: With tax authorities now having access to extensive financial information through multiple reporting systems, experts are advising that salaried employees should move beyond Form 16 and carefully reconcile all income, deductions and disclosures.
- Jul 16, 2026,
- Updated Jul 16, 2026 4:30 PM IST
Filing an income tax return (ITR) is no longer as simple as copying salary details from Form 16. With the Income Tax Department relying on Form 26AS, the Annual Information Statement (AIS) and the Taxpayer Information Summary (TIS), even minor errors or omissions can trigger tax notices, additional tax liability, interest, penalties or delayed refunds.
CA Suresh Surana says salaried taxpayers should reconcile all income, deductions and disclosures before filing their returns to avoid costly mistakes. Here are eight common errors employees should watch out for.
1. Depending only on Form 16
Surana says Form 16 contains salary income and tax deducted at source (TDS) reported by the employer, but it may not include income from fixed deposits, savings accounts, dividends, capital gains, rental income or freelance work.
He advises taxpayers to reconcile Form 16 with Form 26AS, AIS, TIS, bank statements and investment records before filing the return.
2. Choosing the wrong tax regime
Many employees select the old or new tax regime without comparing their tax outgo.
According to Surana, while the new tax regime offers lower slab rates, it restricts several exemptions and deductions available under the old regime, including HRA, LTA, home loan interest on self-occupied property and deductions under Sections 80C, 80D and 80CCD(1B), except those specifically allowed.
He recommends comparing tax liability under both regimes before filing.
3. Claiming deductions without valid proof
Employees sometimes claim deductions based on investments declared to their employer but not actually made before the financial year ends.
Surana advises taxpayers to retain receipts for insurance premiums, ELSS investments, provident fund contributions, home loan repayments and eligible donations before claiming deductions under Sections 80C, 80D, 80CCD, 80G and other provisions.
MUST READ: Before filing your ITR, complete this 10-minute checklist to avoid an Income Tax notice
4. Incorrect reporting of capital gains
Taxpayers investing in shares, mutual funds, ESOPs or property often make mistakes while reporting capital gains.
Surana says gains must be classified correctly as short-term or long-term after considering the holding period, cost of acquisition, sale value, indexation benefits and available exemptions. Incorrect reporting may lead to tax demands.
5. Misreporting bonus, arrears or severance pay
Joining bonuses, retention bonuses, arrears, advance salary, severance pay and retirement benefits may have different tax treatments.
Surana says some payments may qualify for relief under Section 89 or partial exemption, while others are fully taxable. Employees should verify their salary slips, employer communication and Form 16 before reporting such income.
6. Failing to disclose foreign assets
Resident and ordinarily resident taxpayers are required to disclose foreign assets and income, including overseas bank accounts, foreign shares, ESOPs and financial interests in foreign entities.
Surana notes that non-disclosure can attract a ₹10 lakh penalty under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, subject to prescribed exceptions.
7. Bank account mistakes delaying refunds
Refunds can be delayed due to incorrect account details, non-validation of bank accounts or PAN-bank mismatches.
Surana advises taxpayers to ensure that the refund account is active, pre-validated and linked with PAN before filing the return.
8. Forgetting to verify the ITR
Filing the return is not the final step. Surana says taxpayers must e-verify the ITR within the prescribed timeline using Aadhaar OTP, net banking or other approved methods.
If the return is not verified, it may be treated as invalid, delaying refunds and affecting return processing.
With tax authorities now having access to extensive financial information through multiple reporting systems, Surana says salaried employees should move beyond Form 16 and carefully reconcile all income, deductions and disclosures. A well-documented and accurate ITR can help avoid notices, unnecessary tax demands, penalties and refund delays while ensuring all eligible tax benefits are correctly claimed.
MUST READ: Filing ITR-1 for AY 2026-27? These 5 new changes in the excel utility could affect your tax return
Filing an income tax return (ITR) is no longer as simple as copying salary details from Form 16. With the Income Tax Department relying on Form 26AS, the Annual Information Statement (AIS) and the Taxpayer Information Summary (TIS), even minor errors or omissions can trigger tax notices, additional tax liability, interest, penalties or delayed refunds.
CA Suresh Surana says salaried taxpayers should reconcile all income, deductions and disclosures before filing their returns to avoid costly mistakes. Here are eight common errors employees should watch out for.
1. Depending only on Form 16
Surana says Form 16 contains salary income and tax deducted at source (TDS) reported by the employer, but it may not include income from fixed deposits, savings accounts, dividends, capital gains, rental income or freelance work.
He advises taxpayers to reconcile Form 16 with Form 26AS, AIS, TIS, bank statements and investment records before filing the return.
2. Choosing the wrong tax regime
Many employees select the old or new tax regime without comparing their tax outgo.
According to Surana, while the new tax regime offers lower slab rates, it restricts several exemptions and deductions available under the old regime, including HRA, LTA, home loan interest on self-occupied property and deductions under Sections 80C, 80D and 80CCD(1B), except those specifically allowed.
He recommends comparing tax liability under both regimes before filing.
3. Claiming deductions without valid proof
Employees sometimes claim deductions based on investments declared to their employer but not actually made before the financial year ends.
Surana advises taxpayers to retain receipts for insurance premiums, ELSS investments, provident fund contributions, home loan repayments and eligible donations before claiming deductions under Sections 80C, 80D, 80CCD, 80G and other provisions.
MUST READ: Before filing your ITR, complete this 10-minute checklist to avoid an Income Tax notice
4. Incorrect reporting of capital gains
Taxpayers investing in shares, mutual funds, ESOPs or property often make mistakes while reporting capital gains.
Surana says gains must be classified correctly as short-term or long-term after considering the holding period, cost of acquisition, sale value, indexation benefits and available exemptions. Incorrect reporting may lead to tax demands.
5. Misreporting bonus, arrears or severance pay
Joining bonuses, retention bonuses, arrears, advance salary, severance pay and retirement benefits may have different tax treatments.
Surana says some payments may qualify for relief under Section 89 or partial exemption, while others are fully taxable. Employees should verify their salary slips, employer communication and Form 16 before reporting such income.
6. Failing to disclose foreign assets
Resident and ordinarily resident taxpayers are required to disclose foreign assets and income, including overseas bank accounts, foreign shares, ESOPs and financial interests in foreign entities.
Surana notes that non-disclosure can attract a ₹10 lakh penalty under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, subject to prescribed exceptions.
7. Bank account mistakes delaying refunds
Refunds can be delayed due to incorrect account details, non-validation of bank accounts or PAN-bank mismatches.
Surana advises taxpayers to ensure that the refund account is active, pre-validated and linked with PAN before filing the return.
8. Forgetting to verify the ITR
Filing the return is not the final step. Surana says taxpayers must e-verify the ITR within the prescribed timeline using Aadhaar OTP, net banking or other approved methods.
If the return is not verified, it may be treated as invalid, delaying refunds and affecting return processing.
With tax authorities now having access to extensive financial information through multiple reporting systems, Surana says salaried employees should move beyond Form 16 and carefully reconcile all income, deductions and disclosures. A well-documented and accurate ITR can help avoid notices, unnecessary tax demands, penalties and refund delays while ensuring all eligible tax benefits are correctly claimed.
MUST READ: Filing ITR-1 for AY 2026-27? These 5 new changes in the excel utility could affect your tax return