Summary of this article
Wrong ITR forms, income mismatches with AIS/Form 26AS, and missed disclosures made many returns defective
Non-reporting of interest income, crypto gains, and foreign assets triggered scrutiny and tax notices
Late filing and failure to e-verify returns resulted in penalties and loss of tax benefits
Tax experts stress early filing, proper disclosure, and document-backed deductions to avoid trouble
As 2025 comes to an end, one thing is clear - many Indian taxpayers continued to make common mistakes while filing their income tax returns (ITR) during the year. Most of these errors were avoidable and happened due to a lack of awareness, last-minute filing, or incorrect understanding of tax rules. These mistakes often led to income tax notices, penalties, delayed refunds, or even invalid returns.
Here are the top tax filing mistakes made by Indian taxpayers in 2025:
1. Choosing The Wrong ITR Form
Many taxpayers selected the wrong ITR form without checking their income type. “Using an incorrect form made the return defective and forced taxpayers to file a corrected return within a limited time. This mistake was common among individuals with capital gains, multiple income sources, or business income,” says CA Abhishek Soni, CEO & Co-founder, Tax2win.
2. Not Reporting All Sources Of Income
A large number of taxpayers failed to report interest income from savings accounts, fixed deposits, recurring deposits, dividends, and capital gains. Since these details are already available in Form 26AS and AIS, the Income Tax Department easily detected mismatches and issued notices.
3. Mismatch With AIS And Form 26AS
Many taxpayers did not cross-check their income details with AIS, TIS, and Form 26AS before filing their return. This led to differences in reported income and tax paid, resulting in scrutiny or demand notices.
4. Claiming Higher Deductions Than Declared
Another common mistake was claiming more deductions in the ITR form than what was declared to the employer during the year. “While claiming deductions is allowed, doing so without proper supporting documents raised red flags and increased the chances of verification or notices,” says Soni.
5. Missing Disclosure Of Foreign Assets And Income
Several taxpayers failed to report foreign bank accounts, shares, ESOPs, or foreign income under Schedule FA. Many assumed a disclosure was required only if tax was payable. However, reporting foreign assets is mandatory, even if there is no income or tax liability.
6. Not Reporting Income From Virtual Digital Assets
In 2025, many taxpayers missed or wrongly reported income from virtual digital assets (VDAs) such as cryptocurrency and NFTs. “Crypto income is taxable at a flat rate, and losses cannot be set off. Non-reporting of such income often leads to notices and penalties,” informs Soni.
7. Late Filing Of ITR
Late filing of ITRs remained a major issue. Taxpayers who missed the due date faced late fees, loss of interest on refunds, and restrictions on carrying forward losses. Many waited until the last moment and ended up making errors.
8. Forgetting To E-Verify The ITR
Many taxpayers filed their ITR but forgot to e-verify it. Without verification, the return becomes invalid, and the tax filing holds no legal value.
The tax filing mistakes made in 2025 highlight the importance of careful planning, correct reporting, and timely filing. Reviewing income details, disclosing foreign and digital assets, claiming accurate deductions, and verifying the return can help taxpayers avoid notices, penalties, and unnecessary stress.
