Accurate reporting of income from multiple sources, including earnings from salary, house property, capital gains, business or a side hustle, is crucial while filing the Income-tax Return (ITR). A mismatch between reported income and information captured in the Annual Information Statement (AIS) and tax credit statements such as Form 26AS may trigger compliance notices or potential scrutiny assessments.

"Since the Income Tax Department (ITD) already captures a lot of data in AIS/TIS and Form 26AS, it is important to report all income streams, reconcile figures with AIS/TIS and bank statements, claim deductions carefully, and address discrepancies promptly before filing. Ensuring all income streams are properly reconciled with the documents is the simplest way to stay compliant and avoid notices," says Avnish Arora, executive director, direct tax, Forvis Mazars India.

According to experts, the first step is to disclose all income heads for accuracy. "Income that is often overlooked includes interest from savings accounts, recurring and fixed deposits, dividends, rental income, capital gains from mutual fund redemptions or securities transactions, and even exempt incomes such as agricultural income or long-term equity gains within the exemption threshold. Disclosing exempt income is equally important, as it aids in reconciling AIS entries and prevents unwarranted queries," says CA Suresh Surana.

Then comes selecting the correct ITR form that corresponds to the nature and quantum of income. For instance, ITR-1 (Sahaj) can be used by resident individuals with salary income. This includes a house property and interest income up to ₹50 lakh. However, taxpayers opting for presumptive income should select ITR-4.

It is important to note that the wrong ITR form selection may entail an invalid return and attract interest and penal consequences.

Thirdly, choose the right tax regime. From FY25, the new tax regime has become the default. It is important to understand the difference between the two regimes. The new one offers concessional slab rates. On the other hand, the old one permits claiming deductions and exemptions under Sections 80C, 80D, 24(b), 10(10D), and 10(13A), but subjects the taxpayer to comparatively higher tax rates.  Therefore, taxpayers must evaluate their tax liability under both regimes and choose the beneficial tax regime.

The Finance Act (No. 2), 2024, introduced significant changes in capital gains effective July 23, 2024. Accordingly, the resident taxpayer would be required to bifurcate their capital gains tax liability before and after July 23, 2024, as follows:

Notably, resident individuals and HUFs may still opt between 12.5% (without indexation) and 20% (with indexation) for immovable property acquired before July 23, 2024.

For FY25, the due date for individual non-audit cases is September 15, 2025. "Delayed filing attracts late fees under Section 234F, interest under Sections 234A/B/C, non-availability of set off and carry-forward of losses (except house property loss) and penal consequences," says Surana. Hence, taxpayers should ensure the timely furnishing of their returns.

Consistency in filing across years is another factor that reduces the risk of notices. For instance, if a particular asset was disclosed in earlier years, omission of income generated from that asset in subsequent years may be flagged by the system. Similarly, capital gains calculations should be supported by proper workings, including the cost of acquisition, indexation where applicable, and supporting documents like contract notes and sale deeds.

When you claim deductions or exemptions, thoroughly check them before filing and ensure you provide correct details of supporting documents such as rent receipts, investment proofs, policy details or donation certificates.

Scrutiny may take place if you provide overstatements or unsupported claims. This mistake happens when you select the old tax regime.