ITR filing challenges AY 2026-27: From AIS errors to refund delays, what taxpayers need to know

Nowadays, filing an income tax return involves more than merely filling out the form, sending it in, and waiting for it to be processed. Due to the Income Tax Department's expanded use of technology, data analytics, and automated verification systems, taxpayers must now make sure that each declaration is correct and supported by the appropriate paperwork.

Challenges such as selecting the correct ITR form, reconciling financial data, reporting investments, and complying with mandatory disclosure requirements have become increasingly important.

According to Rajiv Thakkar, Partner - Direct Tax at Bhuta Shah & Co LLP, the changing tax filing environment has made accuracy and timely compliance more important than ever.

He highlights that taxpayers are increasingly facing challenges related to ITR form selection, data reconciliation, capital gains reporting, refund processing, and mandatory disclosures.

He highlights the following key compliance challenges faced by taxpayers under the revised framework:

Availability of ITR forms and schema

Delay in the release of ITR forms and JSON schema, along with subsequent updates, can inconvenience taxpayers and lead to rushed filings. Such returns may be more prone to errors and omissions due to limited time before the due date, resulting in delays in processing and refunds.

Selection of correct ITR form

Reconciliation of information

Reporting of capital gains

Taxpayers should carefully verify capital gains reporting, including classification of gains as long-term or short-term, applicability of grandfathering provisions, computation of exempt and taxable gains, and set-off or carry forward of losses.

Refund discrepancies

Refund claims are subject to automated checks, and discrepancies may result in refunds being withheld. Failure to respond to communications may lead to prolonged delays, disputes, penalties, and cash flow concerns.

Mandatory disclosures

Taxpayers must ensure compliance with mandatory reporting requirements, including foreign asset disclosures. Non-reporting of foreign assets by residents can attract significant penalties under applicable laws.

The era of ‘file and forget’ tax returns is over as taxpayers face greater reporting scrutiny.