CA shares Ten Smart Checks Before Filing Your ITR in India: Avoid Mistakes, Mismatches, and Tax Notices

There are several significant checks that taxpayers should perform before filing their Income Tax Return (ITR) in India. These checks facilitate avoiding notices, mismatches, or wrong filings, especially for professionals, traders, and business persons. Below is the detailed breakdown:

1. Continuity of New Regime or Old Regime: Check Previous Year’s Option

According to the income tax rules, taxpayers are given a choice between the Old and New Tax Regime. If the taxpayer is a salaried individual, then he/she can choose this option every year. However, if the taxpayer has business/professional income, the rules are harder. Once a taxpayer chooses a new tax regime by filling out Form 10-IEA, he/she is not allowed to opt out of the regime unless his/her business or professional income stops. Therefore, it is recommended to always carefully think before choosing any regime, check which regime you opted for the previous year, and submit this year accordingly.

2. Continuity of Presumptive Scheme under Section 44AD (5-Year Rule): For Business Income

If the taxpayer is a small business owner utilising the Presumptive Taxation Scheme under Section 44AD, then he/she should comply with it for five continuous years once chosen. If he/she stops in the middle and begins showing lower income without getting a tax audit, then he/she will not be permitted to opt for presumptive again for the next five consecutive years. Therefore, it is advised to check if you have chosen presumptive income last year. If yes, then you must continue this year too unless you are ready for a tax audit.

3. Match Broker’s Profit and Loss Report with AIS and TIS Data

If a taxpayer is engaged in trading, then he/she probably receive a Profit & Loss (P&L) statement from their broker. However, this data is also collected by the Income Tax Department under the Annual Information Statement (AIS) and Taxpayer Information Summary (TIS). It is important to align your broker’s P&L report with what’s mentioned in AIS/TIS to avoid discrepancies and scrutiny. If there is a mismatch, update the AIS through the compliance portal or explain while filing.

4. Last Year’s 10-IEA Details – For Regime Change Tracking

If a taxpayer chooses the New Tax Regime in the last year using Form 10-IEA, the choice gets locked in. Therefore, he/she cannot choose again unless his/her business income is no longer there. Hence, check whether you filed Form 10-IEA last year, and based on that, decide your regime this year to avoid filing mistakes.

5. Calculate Turnover in Case of Intraday or F&O: For Tax Audit Applicability

Traders in F&O or intraday need to calculate turnover correctly. It’s not like a regular business where sales are equal to the turnover. In trading, F&O turnover is equal to the sum of absolute profit/loss, premium on options, and other charges. Intraday turnover is equal to the absolute profit/loss from squaring off. A tax audit is required if turnover exceeds Rs. 10 crore (cash receipts ≤ 5% of total) or exceeds Rs. 1 crore and profit is below 6% of turnover, and you haven’t opted for presumptive income. Therefore, it is advised to make sure you calculate this properly using your broker’s reports and auditor guidance.

6. Cash Exposure: Check if a Tax Audit is Required (Rs. 1 Cr to Rs. 10 Cr Threshold)

Under income tax law, businesses with turnover up to Rs. 10 crore do not require an audit if cash receipts and payments are less than 5% of total receipts/payments. But if your cash usage is high, the threshold drops to Rs. 1 crore. So, check how many of your transactions (receipts and payments) are in cash. If it is more than 5%, you might fall under the audit requirement at a lower limit.

7. Opting for the Old Regime for Deductions: Fill in All Details Carefully

If you decide to go with the Old Tax Regime, you must properly claim all eligible deductions. Do not just mention the amount; also fill in policy numbers, the PAN of the donee (for donations), and other proof details correctly. This ensures smooth processing and avoids mismatches during CPC verification.

8. Brought Forward Loss Figures – Check and Claim Properly

If you had a capital loss, business loss, or house property loss from past years, you can carry them forward to set off against future income. But this is only allowed if you had filed ITR on time in the previous year. So, check last year’s ITR or assessment order to verify how much of the loss is still available to carry forward and adjust it in this year’s filing correctly.

9. AIS, TIS, and Form 26AS Matching

Before finalising your return, match all the data in AIS, TIS, and Form 26AS. If there is a mismatch, provide feedback in the AIS portal or provide an explanation. Ignoring mismatches can lead to IT notices or additional tax demands.

10. Delivery-Based Share Transactions: Trading vs. Investment Classification

If a taxpayer is a stock market participant, then he/she must decide whether his/her delivery-based stock transactions are investments (capital gains), taxed at 10%/15%/20% depending on type, or business income (as a trader), taxed as per the slab rate. Frequent buying and selling, high volume, or use of borrowed money indicates trading. If a taxpayer is classified as a trader, all transactions (even delivery-based) go as business income, and deductions for expenses are allowed. But if you’re an investor, show these under capital gains with no deduction for trading expenses. Misclassification may lead to wrong tax calculation or issues in inspection.

Few checks before you file ITR – broad categories of important checks

1. continuity of New regime or Old regime – check last year

2. continuity of Presumptive scheme 44AD ( 5 YEAR BLOCK ) in case of business – check last year

3. Matching Broker’s PRofit loss report and AIS…

— CA Harshil sheth (@CA_HarshilSHETH) July 28, 2025