For many salaried individuals and independent earners across India, the annual ritual of filing Income Tax Returns (ITR) often brings a sense of unease. While the goal is to comply with tax laws, a significant portion of taxpayers frequently find themselves paying more than necessary. Financial experts point out that this is rarely due to high income alone, but rather a result of hurried planning or a lack of clarity regarding the right tax regime and available deductions.

Navigating the Default Regime

As of May 2026, the New Tax Regime remains the default option for all taxpayers. Unless an individual explicitly opts for the Old Tax Regime during the filing process, the income tax department will automatically calculate their liability under the new structure. While the new system offers lower tax rates and simplifies compliance by removing the need for extensive investment documentation, it largely excludes traditional exemptions.

"The choice between the two regimes is not one-size-fits-all," notes a tax consultant familiar with current filing trends. "Taxpayers must assess whether their specific investment portfolio—such as housing loans, health insurance, or specific savings schemes—justifies sticking with the Old Tax Regime, where these deductions still hold significant value".

Common Mistakes Costing Money

Ground-level reports from this filing season highlight several recurring errors that inflate tax liability. A primary issue remains the failure to reconcile personal income data with the Annual Information Statement (AIS) and Form 26AS. "When a taxpayer manually enters figures that don't match the bank or broker-reported data in the AIS, it immediately triggers automated queries from the tax department, leading to delays and potential penalties," explains one advisor.

Other frequent oversights include:

• Selecting the incorrect ITR form for one's specific income type.

• Failing to claim deductions like HRA or LTA despite being eligible.

• Omitting interest income from FDs or savings accounts, leading to later scrutiny.

• Neglecting to e-verify the return after submission, which renders the entire filing incomplete.

Smart Planning Saves Tax

Strategic tax planning is most effective when initiated early in the financial year, rather than as a last-minute scramble. Taxpayers can often optimize their liability by leveraging specific sections of the Income Tax Act. For instance, combining the Section 80C limit of ₹1.5 lakh—which includes ELSS, PF, and home loan principal—with the additional ₹50,000 exemption available through the National Pension System (NPS) provides a substantial cushion.

Health insurance also plays a dual role, offering both essential financial protection and tax benefits under Section 80D. Premiums paid for self, family, and parents can lead to significant deductions, effectively reducing taxable income. By systematically mapping these investments against the projected annual income, individuals can move away from reactive tax paying and toward a more efficient financial standing.