With the July 31 deadline for filing income tax returns (ITRs) fast approaching, tax experts have identified data mismatches across financial records and changes in residential property taxation as the biggest challenges facing taxpayers this filing season.
Data mismatches
Experts said taxpayers should not rely solely on the pre-filled information available on the Income Tax Department's e-filing portal, warning that inconsistencies between different financial statements have become one of the leading triggers for scrutiny notices.
"The biggest challenge for taxpayers this filing season is not merely filing the return on time, but ensuring that what is filed can withstand scrutiny against the data already available with the Income Tax Department," said Rahul Charkha, Partner at Economic Laws Practice.
According to him, mismatches between the Annual Information Statement (AIS), Form 26AS, Form 16, bank records, broker statements and taxpayers' own records are among the most common reasons for tax queries. He also advised taxpayers to exercise caution while selecting the appropriate ITR form.
Tax professionals said compliance has become more complex for individuals earning income from multiple sources, including capital gains, foreign assets, employee stock ownership plans (ESOPs), cryptocurrencies and overseas income, as these categories require more extensive disclosures.
Property tax changes
Another major area of confusion this year relates to changes in the taxation of residential property sales introduced in the Union Budget.
"One challenge we are seeing this year is due to the change in the tax rules for the sale of residential property. The Budget introduced a new 12.5% long-term capital gains (LTCG) tax rate without indexation, while taxpayers selling properties purchased before July 23, 2024 have the option to choose between the old 20% tax with indexation and the new 12.5% tax without indexation. In some cases, taxpayers have noticed incorrect computation of surcharge or interest in the return utility, requiring manual verification before filing," said Gaurav Makhijani, Managing Partner at Makhijani Gera & Associates LLP.
Experts also pointed to confusion arising from the coexistence of the newly enacted Income Tax Act, 2025 and the return forms, which continue to follow the framework and terminology of the Income-tax Act, 1961. However, they clarified that this does not create any practical difficulty because the filing utilities remain aligned with the current assessment year.
Portal largely stable
On the technology front, tax experts said the Income Tax Department's e-filing portal has largely remained stable despite some initial glitches after recent system upgrades. Some users, however, reported temporary issues relating to registration of new entities and certain portal functionalities.
Responding to a question in Parliament on Monday, Minister of State for Finance Pankaj Chaudhary said that while taxpayers may occasionally experience slower response times or intermittent delays during peak filing periods because of heavy concurrent traffic, the e-filing portal has been functioning in a "largely stable and efficient manner" and its performance is being continuously monitored.
Taxpayer-centric reforms
The government has also maintained that the new Income Tax Act, 2025 and the upgraded e-filing portal have significantly improved the return filing process.
Finance Minister Nirmala Sitharaman recently said the modernized tax framework has enabled the system to handle over 3.2 crore ITRs and millions of daily interactions during peak filing periods. She said the administration aims to distinguish between genuine mistakes and deliberate tax evasion, while providing honest taxpayers with opportunities to correct bona fide errors, faster refund processing and greater tax certainty.