Income-tax refund for AY 2026-27: These 3 mistakes can delay your refund this year

One major reason is the transition to the new Income Tax Act, 2025, which became effective from April 1, 2026. Although income earned during FY 2025-26 will still be assessed under the old Income-tax Act, 1961, the compliance ecosystem, backend systems, verification layers, and reporting structures are undergoing a major transition phase. 

The shift is expected to result in more scrutiny, more data reconciliation checks, and slower refund processing for many taxpayers, especially those with mismatched returns or hefty refund claims.

This year, the Income Tax Department relies more heavily on data matching across AIS (Annual Information Statement), Form 26AS, TDS filings, and bank account validation systems. Even small mismatches can trigger additional verification checks, slowing down refund processing. Here are three common mistakes that could delay your income-tax refund for AY 2026-27. 

1. Filing ITR before AIS, Form 26AS, or TDS details are fully updated 

One of the major reasons for refund delays is filing too early without reconciling tax data recorded in AIS, Form 26AS and TDS certificates. Banks, employers, mutual funds and other reporting entities keep updating tax information for weeks after the financial year ends. 

Common issues include:

• Missing TDS entries from salary or fixed deposits
• Incorrect interest income reporting
• Capital gains mismatches from mutual fund or stock transactions
• Duplicate or partially updated entries in AIS

If you file your return before all entries are reflected correctly, the Income Tax Department’s system may detect mismatches between your ITR and official records. 

For example, if your employer has deducted TDS but the same is not yet reflected in Form 26AS at the time of filing, the system may not immediately initiate full tax credit, hence this could result in further scrutiny and a delay of the refund.

Therefore, taxpayers should wait until all tax statements are fully updated and reconciled before filing returns, especially salaried taxpayers relying on Form 16 and AIS data. 

2. Entering incorrect bank account details or failing to pre-validate the account 

Your bank account mentioned in the ITR should be a valid, linked and pre-validated bank account on the income-tax portal for processing of your refund. Taxpayers often make these errors:

• Wrong account number and incorrect IFSC code entry
• Mentioning details of dormant or closed bank accounts
• Failing to pre-validate the account on the e-filing portal
• Not linking the PAN with the bank account

If the refund issued by the Income Tax Department fails due to wrong bank details, the refund process may get considerably delayed. In many cases, the taxpayer will need to submit a reissue request Refund Reissue Request on the Income Tax e-filing portal after correcting the account information. Refund reissue requests typically take 7 to 10 working days to process after submission.

Hence, taxpayers should use an active savings account linked with PAN and ensure the account is pre-validated before submitting the ITR.

3. Mismatch in income reporting, deductions, or capital gains 

Whenever the income declared in the ITR does not match the information available with the tax department, refunds are undoubtedly delayed. This is becoming increasingly important as the AIS system now covers a broad spectrum of financial transactions, such as:

• Savings account interest
• Fixed deposit interest
• Dividend income
• Securities transactions
• Mutual fund redemptions
• Foreign remittances
• High-value transactions

Another important area of concern is the reporting of incorrect capital gains, which can result in tax notices or penalties under Section 270A. Capital gains are reported on specific forms. Instead of ITR-1, use the appropriate ITR form, such as ITR-2 or ITR-3, depending on the type of your income. 

For example, if you are an active or intra-day stock trader, it has to be treated as business income and requires ITR-3 filing. It should not be treated as capital gains. Most of the automated notices are generated when your capital gains do not match the Annual Information Statement (AIS) or Form 26AS. 

If you have filed an incorrect return showing a capital gain, you can easily correct this by filing a Revised Return or an online rectification request.

What taxpayers should do before filing ITR for AY 2026-27?

To avoid refund-related issues, taxpayers should complete a final reconciliation checklist before filing:

• Match income details with AIS and Form 26AS
• Verify TDS entries carefully
• Reconcile bank interest and dividend income
• Check capital gains statements thoroughly
• Use the correct ITR form
• Pre-validate bank accounts
• Verify PAN-Aadhaar linkage status
• E-verify the return immediately after filing

Word of caution for taxpayers

Refunds may be issued rather promptly to a taxpayer with properly reconciled records, an accurate income declaration, and verified bank details. Even minimal disparities, nevertheless, have the potential to force the return into rounds of manual review or correction.

Individuals having multiple sources of income, generating capital gains, owning foreign assets, receiving freelance income, or engaging in high-value financial transactions should be particularly careful, since these categories are subject to more severe data scrutiny under the current reporting framework. For AY 2026-27, careful reconciliation, correct disclosures and documentation continue to be the best approaches to ensure faster refund processing.

Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Tax laws and regimes are subject to frequent changes by the government. Readers should verify details with official Income Tax Department notifications or consult a Chartered Accountant before making any financial decisions.  

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