Filing income tax returns (ITR) is not just a legal obligation — it’s also a way to stay financially compliant and avoid trouble with the Income Tax Department of India. But every year, lakhs of taxpayers — especially salaried employees, freelancers, and first-time filers — make common tax filing mistakes that result in notices, penalties, and scrutiny.
In 2025, the Income Tax Department has strengthened AI-based scrutiny and automatic mismatch detection. Even a small slip-up in your return can trigger a notice, delay refunds, or worse — lead to legal proceedings.
In this comprehensive article, we’ll explain the top ITR mistakes to avoid in 2025, how the IT Department detects them, and what you can do to stay safe and compliant.
📌 1. Not Reporting All Sources of Income
Most Common Mistake
Many taxpayers report only their salary or primary business income — but forget to disclose:
- Interest on savings and FDs
- Rental income
- Freelancing or side gig income
- Capital gains from shares, mutual funds, or crypto
- Dividend income (even if exempt)
The Income Tax Department cross-verifies data from banks, PAN-based investments, and Form 26AS. If something’s missing — a mismatch notice (under section 139(9) or 143(1)) will follow.
👉 What to do:
Report all sources, even exempt income. Use AIS (Annual Information Statement) and Form 26AS before filing.
📌 2. Ignoring Form 26AS & AIS Before Filing
Form 26AS and AIS are like the IT Department’s summary of your financial life.
They include:
- TDS from salary, rent, or contracts
- Interest income from banks
- Mutual fund redemptions
- High-value transactions
- Stock trading activities
- Property purchases
If you file your ITR without checking these — and there’s a mismatch — you will receive a tax discrepancy notice.
👉 What to do:
Always reconcile your data with:
- Form 26AS from TRACES
- AIS/TIS from income tax portal
This is mandatory in 2025 due to stricter e-verification.
📌 3. Filing the Wrong ITR Form
There are 7 types of ITRs. Filing the wrong form (e.g., filing ITR-1 when you have capital gains) may invalidate your return.
Example Mistakes:
- Using ITR-1 despite multiple properties or capital gains
- Freelancers using ITR-1 instead of ITR-4 or ITR-3
- NRIs filing ITR-1 (not allowed)
👉 What happens:
- Your return may be treated as defective
- You may get a notice under Section 139(9)
👉 What to do:
Check your eligibility on the Income Tax India e-filing portal or consult a CA.
📌 4. Not Reporting Capital Gains Properly
Capital gains are closely tracked through brokerages, demat accounts, and mutual fund platforms. Mistakes include:
- Not declaring short-term or long-term capital gains on stocks/crypto
- Incorrect calculation of indexed cost
- Ignoring foreign shares or investments
👉 What happens:
A mismatch in AIS/Form 26AS may lead to:
- Notice under Section 148 (income escaped assessment)
- Penalties and interest
👉 What to do:
Report all capital gains (even if losses), and use proper LTCG/STCG classification. Use online capital gain calculators if needed.
📌 5. Claiming Fake or Inflated Deductions
Some taxpayers falsely claim deductions to reduce tax:
- Faking 80C investments (LIC, PPF, ELSS)
- Claiming HRA without rent receipts
- False 80D (Health Insurance) premiums
- Tuition fee under 80C for non-eligible courses
💥 The IT Department cross-verifies investment proofs submitted to your employer and compares them with AIS data.
👉 What happens:
- Notice under Section 143(1) for discrepancy
- Demand notice for additional tax + 200% penalty under Section 270A
👉 What to do:
Claim only genuine deductions backed by receipts or bank statements.
📌 6. Not Filing ITR if TDS Is Already Deducted
Many salaried employees assume:
“TDS is already deducted, so I don’t need to file ITR.”
🚫 Big Mistake!
TDS deduction ≠ Tax compliance. Filing ITR is mandatory if your income exceeds ₹2.5 lakh (old regime) or ₹3 lakh (new regime), regardless of TDS.
👉 What happens:
- You may get a non-filing notice under Section 142(1)
- Legal action for non-compliance
👉 What to do:
If income crosses the threshold, file ITR even if you’ve paid all your tax via TDS.
📌 7. Not Verifying ITR After Filing
Filing your ITR is not the last step — you must verify it within 30 days (as per new rules).
You can verify via:
- Aadhaar OTP
- Net banking
- EVC
- Sending signed ITR-V by post to CPC, Bangalore
👉 What happens if you don’t verify?
Your ITR is invalid, and you may receive a non-filing notice. Refunds also won’t be processed.
📌 8. Late Filing or Non-Filing of ITR
The last date for filing ITR for individuals (non-audit cases) is 31st July 2025.
Filing after the deadline leads to:
- Late fees under Section 234F (up to ₹5,000)
- Loss of carry-forward benefits (losses, deductions)
- Higher chance of scrutiny
👉 What to do:
Mark your calendar. File early to avoid:
- Site slowdowns
- Technical glitches
- Last-minute errors
📌 9. Not Disclosing Foreign Assets/Income (for NRIs and Residents)
If you hold:
- Foreign bank accounts
- Stocks or ESOPs in foreign companies
- Property outside India
- Cryptocurrencies on global exchanges
You must report them under Schedule FA.
👉 What happens if you don’t?
Under Black Money Act, it can lead to:
- ₹10 lakh penalty per undisclosed asset
- Prosecution
👉 What to do:
Disclose all overseas holdings honestly, especially if you’re an NRI or resident with foreign income.
📌 10. Providing Wrong Bank Account for Refund
If your bank account is:
- Not linked with PAN
- Not pre-validated
- Closed or frozen
Your ITR refund will fail.
👉 What to do:
Always:
- Pre-validate your active bank account on e-filing portal
- Double-check the IFSC, account number, and holder name
📌 11. Filing ITR in the Wrong Assessment Year
Some people mistakenly file for AY 2024–25 instead of AY 2025–26.
👉 Result:
- Your ITR will be rejected
- You’ll still be considered as non-filer
👉 What to do:
Remember:
Assessment Year = Financial Year + 1
So for income earned between April 1, 2024 – March 31, 2025, file ITR for AY 2025–26.
📌 12. Ignoring High-Value Transactions
Transactions like:
- Cash deposits over ₹10 lakh
- Credit card payments over ₹1 lakh
- Mutual fund investments above ₹2 lakh
- Property purchase above ₹30 lakh
Are reported to the IT Department by banks & institutions.
👉 If you ignore these in your ITR — expect an underreporting notice or even search/scrutiny.
🔍 How the IT Department Detects These Mistakes in 2025
Thanks to improved tech and AI, the IT Department now:
- Matches your ITR with Form 26AS, AIS, TIS
- Flags mismatches instantly
- Tracks PAN-based spending
- Uses AI to detect anomalies in salary, rent, loans, and property
So filing a clean, correct, and complete return is no longer optional — it’s necessary.
✅ How to Avoid Getting a Notice: Smart Checklist (2025 Edition)
- ✅ Reconcile ITR with Form 26AS and AIS
- ✅ Use the correct ITR form
- ✅ Disclose all income (even exempt and foreign)
- ✅ Claim only valid deductions
- ✅ File before 31 July 2025
- ✅ Verify your return after submission
- ✅ Keep proofs of all investments
- ✅ Avoid rounding errors
- ✅ Pre-validate your bank account
- ✅ Check for spelling/PAN/DOB mismatches
❓ FAQs on Income Tax Notices (2025)
Q1. I got a notice. What should I do?
👉 Don’t panic. Read the notice carefully. Respond online via the e-filing portal within the timeline mentioned.
Q2. Can I revise a return if I made a mistake?
✅ Yes. You can file a revised return under Section 139(5) before 31 December 2025.
Q3. What happens if I ignore the notice?
🚫 Ignoring can lead to:
- Re-assessment
- Penalty up to 200% of tax dues
- Even prosecution in serious cases
📌 Conclusion
Filing your ITR in 2025 correctly is more than a formality — it’s your ticket to financial peace of mind.
With increased digital surveillance, AI-based matching, and tight deadlines, even an honest mistake can cost you dearly.
So take the extra effort to review, verify, and file your ITR carefully — or consult a tax expert if needed.
🛡️ Stay compliant. Stay stress-free. Let the Income Tax Department remember you — only for your refund, not for a notice!