16 Common Mistakes to Avoid While Filing ITR for FY 2025-26 (AY 2026-27)

Avoiding mistakes while filing Income Tax Return (ITR) is as important as filing ITR before the due date. Some of the common mistakes usually individuals/founders make is selecting the wrong form, mismatch data, verification error, and many more. In this blog, we will cover 16 common mistakes that can trigger heavy penalties & consequences, along with the solution to correct these mistakes. Here's a founder-friendly breakdown of the most common ITR filing mistakes you need to avoid this season.

Mistake 1: Picking the Wrong ITR Form

This is the most foundational error and surprisingly common. Selecting the correct ITR form ensures smooth processing by the Income Tax Department. Filing the wrong form may lead to a defect notice.

In Simple Terms: Each ITR form is designed for a specific type of taxpayer. Using the wrong one and your return is essentially invalid. The department will flag it and send it back.

Here's a quick reference to avoid this mistake:

For founders with a mix of salary, consulting income, and startup equity, ITR-3 is typically the right fit. When in doubt, consult a compliance expert before filing.

Mistake 2: Quoting the Wrong Assessment Year

Quoting the wrong assessment year looks simple, but may result in being costly. The Financial Year and Assessment Year are not the same.

For FY 2025-26, the correct corresponding AY is 2026-27. Mentioning the wrong AY increases the chances of double taxation and attracts unnecessary penalties.

Always double-check before hitting submit. One digit off and your return is filed for the wrong year entirely.

Mistake 3: Incorrect Personal Information

Your return is only as accurate as the personal details you enter. Personal details like name, address, email ID, phone number, PAN, and date of birth must be accurately mentioned in the return of income, and must match those given in your PAN.

The bank account details matter even more if you're expecting a refund. If you are looking at claiming a refund, make sure your bank particulars, account number, IFSC code, etc, are accurately mentioned to receive your refund on time and without hassles. Incorrect bank details will enable the system to flag a bank account error.

Many founders overlook this because they've recently changed banks or updated their address. Make it a habit to verify your prefilled data before proceeding.

Mistake 4: Not Disclosing All Income Sources

This is one of the biggest mistakes which often results in tax notices. Taxpayers have to disclose income from all sources including savings account interest, fixed deposit interest, capital gains, rental income from house property, short-term capital gains, and any other source. The income must be disclosed irrespective of whether it is taxable or exempt.

In Simple Terms: Even if the income is exempt from tax, you still have to report it. Silence is not the same as exemption.

For example: Long-term capital gains are exempt from tax up to ₹1.25 lakh in the case of equity shares or equity-oriented mutual funds, the details of the gains have to be mentioned in the applicable capital gains schedule mandatorily.

For startup founders receiving dividends from investments, earning interest on idle savings, or selling mutual funds, every source needs to find its way into your ITR.

Mistake 5: Sloppy Manual Data Entry

ITR forms have specific formatting requirements that most taxpayers underestimate. The details have to be entered in a particular format. 

For Example: Dates must only be entered in DD/MM/YYYY format. If the date is entered in any other format, the returns would be incorrect.

When you're filing online and rushing through dozens of fields, small formatting errors add up. Review every entry once before submission.

Mistake 6: Not Reconciling With Form 26AS

Form 26AS is your tax credit statement, it's what the Income Tax Department sees. If your return doesn't match it, you have a problem.

Form 26AS includes details of Tax Deducted at Source (TDS), Tax Collected at Source (TCS), high-value investments, advance tax, self-assessment tax, and more. A salaried person must cross-verify the details with Form 16 issued by the employer with Form 26AS.

In cases where the TDS is not reflected in your Form 26AS, you will not get credit for tax deductions not mentioned there. Mismatches between Form 26AS and Form 16 or TDS certificates may lead to less refund or more taxes payable.

Before filing, download both Form 26AS and Form 16 and compare them line by line. Any mismatch needs to be resolved first with your employer or deductor before your return goes in.

Mistake 7: Ignoring AIS and TIS Data

Beyond Form 26AS, there are now two more statements you need to reconcile with.

The Annual Information Statement (AIS) is an extension of Form 26AS consisting of more comprehensive details like GST turnover, purchase and sale of securities, and foreign remittances. The Taxpayer Information Summary (TIS) consists of aggregated information and summary details of the taxpayer.

The derived value in TIS is the updated value after considering the assessee's feedback, and this value will be prefilled in the ITR. It is crucial to make sure that this derived value reflects the actual income and investment of the taxpayer.

If you've sold securities, received foreign payments, or registered for GST, all of this shows up in your AIS. Cross-check it carefully to avoid this mistake.

Mistake 8: Multiple Form 16s and Job Changes

In case you’ve changed your job mid-year, then you have two Form 16s and that's where most salaried founders and startup employees go wrong.

Whenever a taxpayer changes jobs, they end up with different Form 16s from each employer when filing their tax returns. In such cases, taxpayers have to aggregate their incomes from both employers under income from salary.

Both employers deduct TDS independently, often without accounting for the other's salary. This results in you may have paid less tax than required and face a demand. Always aggregate both income figures and compute your actual tax liability before filing.

Mistake 9: Missing HRA Claims

If you pay rent but didn't submit receipts to your employer you may feel like you've lost the HRA benefit. But you haven't.

If an individual doesn't submit rent receipts with company HR, they won't be able to get a house rent allowance from the employer. However, taxpayers can calculate and claim HRA exemption at the time of filing their income tax returns.

Also note: Taxpayers often are not aware that they need their landlord's PAN to avail the HRA benefit. If your annual rent payment exceeds ₹1 lakh, the landlord's PAN is mandatory. Plan ahead.

Mistake 10: Missing Deductions You're Actually Entitled To

Certain deductions are available to taxpayers regarding income, expenditures, and donations. These deductions help taxpayers reduce their tax liability, but figuring out how much can be claimed from what source is tricky.

Common deductions founders miss: Section 80C (PPF, ELSS, life insurance), Section 80D (health insurance premiums), Section 80G (donations), and HRA. Don't leave money on the table by under-claiming.

Mistake 11: Not Paying Advance Tax

If your tax liability exceeds ₹10,000 in a year, advance tax applies and ignoring it is expensive.

Advance taxes should be paid in four installments: June 15th, September 15th, December 15th, and March 15th. Non-payment or short payment of advance tax attracts interest at 1% on the unpaid amount until such shortfall exists.

For startup founders with variable income including consulting fees, freelance income, business profits, advance tax planning is non-negotiable.

Mistake 12: Treating NSC Interest as Tax-Free

Treating NSC Interest as Tax-Free is surprisingly a common misconception. The interest on NSC is fully taxable. However, this interest can be claimed as a deduction under Section 80C for all the years except the last year, where it is taxable under the slab rate. You must mention this income as 'income from other sources' to get the benefits of Section 80C, otherwise, you may end up paying taxes on it without any deduction benefit.

Mistake 13: Filing But Forgetting to E-Verify

Submitting your ITR is not the final step and the E-verification is. After successfully e-filing your income tax return, e-verify your ITR via net banking, Aadhaar card, or the EVC process on your mobile number and email within 30 days of filing. 

If you cannot e-verify online, you can sign and send the ITR-V to the CPC via ordinary or speed post, also within 30 days of e-filing. An unfiled or unverified ITR is treated as if it was never filed at all. The clock starts from the date of submission, not the date of verification.

Mistake 14: Ignoring Notices from the Income Tax Department

If you receive any notice from the Income Tax Department, respond promptly. Ignoring notices can lead to penalties or legal action. Take necessary corrective actions if there are discrepancies or additional taxes to be paid.

The worst thing you can do is ignore a notice hoping it goes away but it won't. Respond within the given timeframe and if you're unsure how, get professional help immediately.

Mistake 15: Not Filing Schedule AL for High-Income Taxpayers

If your net income exceeds ₹50 lakh, you must file Schedule AL. This schedule is to be filled by individuals and HUFs giving details of properties held by the assessee and the corresponding liabilities. 

High-earning founders sometimes overlook this schedule while focusing on the income side. It's mandatory, and omitting it is a compliance lapse.

Mistake 16: Not Disclosing Foreign Assets

NRI founders, employees with foreign ESOPs, and those with offshore investments, usually made this mistake. As per the Income Tax Act, 1961, residents and ordinarily resident Indians should report their foreign income, assets, accounts, and shares in Schedule FA in the ITR, irrespective of whether the income is taxable in India or not. 

Schedule FA requires furnishing details of foreign assets such as foreign shares, foreign company mutual funds, and directly held employee stock options (ESOPs) of foreign companies. Non-disclosure of foreign assets carries severe consequences under the Black Money Act.

Founder’s Scenario 

Example: Vikram, a bootstrapped SaaS founder from Gurugram, spent a Sunday evening filing his ITR himself. He rushed through it, wrong form, mismatched TDS figures, and forgot to e-verify afterward. Later, the Income Tax Department sent him a notice. Entire Sunday wasted, plus weeks of follow-up.

This isn't an edge case, it's the story of thousands of Indian founders, freelancers, and startup professionals every tax season.

The due date for filing tax returns for FY 2025-26 (AY 2026-27) is 31st July 2026 for individual taxpayers filing ITR-1 and ITR-2, and 31st August 2026 for those filing ITR-3 and ITR-4. That clock is ticking and filing in a last-minute rush is exactly when mistakes happen.

Conclusion

Filing taxes correctly isn't just about avoiding penalties but it's about protecting your startup's financial credibility. A clean tax record matters when you're applying for loans, attracting investors, or scaling operations.

At Startup Movers, we handle end-to-end ITR filing and tax compliance for founders, startups, and small businesses across India. From income reconciliation and advance tax computation to notice response and revised return filing, we take compliance off your plate so you can focus on building.