6 Reasons Your Income Tax Return (ITR) May Get Flagged in AY 2026-27

Filing your Income Tax Return (ITR) correctly is more important than ever. The Income Tax Department now uses advanced data analytics to compare the information in your return with records received from banks, employers, stock exchanges, mutual funds, registrars, and other financial institutions.

Even a small mismatch can result in a tax notice, delayed refund, or request for clarification.

This article explains the six most common reasons why an ITR gets flagged and how you can avoid unnecessary notices.

Quick Summary

Why Does the Income Tax Department Flag an ITR?

Before processing your return, the department compares it with various data sources, including:

• Annual Information Statement (AIS)
• Form 26AS
• TDS & TCS Records
• Bank Interest
• Salary Details
• Property Transactions
• Mutual Fund Investments
• Share Market Transactions
• Foreign Remittances
• High-Value Financial Transactions

If any information is missing or inconsistent, your return may be selected for verification.

Reason 1 – AIS and ITR Don't Match

What is AIS?

The Annual Information Statement (AIS) contains financial transactions linked to your PAN.

AIS generally includes:

• Salary Income
• Bank Interest
• Fixed Deposit Interest
• Dividend Income
• Capital Gains
• Mutual Fund Transactions
• Property Transactions
• Foreign Remittances

Example

Result: Your return may be flagged for mismatch.

How to Avoid

✅ Download AIS before filing.

✅ Report every source of income.

✅ Match your bank interest and investment income.

Reason 2 – High-Value Transactions

Banks and financial institutions report certain high-value transactions to the Income Tax Department.

Common Examples

Example

Declared Income: ₹8,00,000

Property Purchased: ₹70,00,000

The department may ask you to explain the source of funds.

Keep These Documents Ready

• Loan Sanction Letter
• Bank Statements
• Gift Deed (if applicable)
• Sale Agreement
• Capital Withdrawal Records

Reason 3 – Wrong Deduction Claims

Claiming deductions without proper supporting documents may result in verification.

Common Mistakes

Always claim deductions only if you are eligible and have documentary evidence.

Reason 4 – Filing the Wrong ITR Form

Using the wrong Income Tax Return form may make your return defective.

Quick Guide

*Always verify the latest eligibility conditions before filing.

Reason 5 – TDS Does Not Match Form 26AS

Before filing your return, ensure that your tax credits match Form 26AS.

Example

This mismatch may delay your refund or trigger a notice.

Before Filing

• Verify Form 16
• Match Form 26AS
• Verify AIS
• Confirm Advance Tax and Self-Assessment Tax

Reason 6 – Ignoring Income Tax Notices

Many taxpayers ignore notices assuming they are not important.

Ignoring a notice can result in:

• Penalty
• Interest
• Reassessment
• Demand Notice
• Further legal proceedings

Always respond within the prescribed time limit.

ITR Filing Checklist

Simple Filing Process

Frequently Asked Questions (FAQs)

What is AIS?

AIS (Annual Information Statement) contains financial information reported to the Income Tax Department against your PAN.

Can I receive a notice after filing my ITR?

Yes. If your return contains mismatches or missing information, the department may issue a notice.

Is every Income Tax notice a penalty?

No. Many notices are issued simply to seek clarification or additional information.

How can I reduce the chances of receiving a notice?

• Verify AIS
• Match Form 26AS
• Report all income
• Claim only eligible deductions
• Select the correct ITR form

Should I consult a Chartered Accountant?

Professional assistance is advisable if you have business income, capital gains, foreign income, multiple properties, or high-value transactions.

Need Professional Assistance?

At Naresh Pokala & Company, Chartered Accountants, we assist individuals, professionals, businesses, and NRIs with:

• Income Tax Return Filing
• AIS & Form 26AS Reconciliation
• Income Tax Notice Replies
• Capital Gains Computation
• Tax Planning
• GST Compliance
• Business Tax Advisory

Our team ensures your return is accurate, compliant, and filed on time.

Conclusion

A tax notice does not necessarily mean you have made a serious mistake, but many notices arise from simple errors such as missing income, incorrect deductions, choosing the wrong ITR form, or mismatches in AIS and Form 26AS.

Review your records carefully before filing your return. Spending a few extra minutes on verification today can help you avoid notices, delays, and unnecessary stress later.