Mumbai (Maharashtra) [India], June 12: For millions of salaried taxpayers, filing an Income Tax Return (ITR) often begins and ends with Form 16. Since employers already deduct taxes, many assume their tax compliance obligations are largely fulfilled.
However, with increasing digitization and data integration across financial institutions, the Income Tax Department today has access to information far beyond salary records. Data from banks, mutual funds, stockbrokers, property transactions, foreign remittances, and cryptocurrency exchanges are increasingly used to verify taxpayers’ disclosures.
Against this backdrop, the Central Board of Direct Taxes (CBDT) has issued scrutiny guidelines for FY 2026-27, reinforcing the importance of accurate reporting and complete disclosure of income.
Why Salaried Taxpayers Should Pay Attention
Contrary to popular belief, scrutiny notices are not restricted to business owners or high-net-worth individuals. Salaried employees may also come under the tax department’s lens when discrepancies emerge between reported income and information available through various reporting systems.
The most common trigger is incomplete disclosure of income.
Many taxpayers file their returns based solely on Form 16 while overlooking other sources such as savings bank interest, fixed deposit interest, dividend income, rental income, freelance earnings, or foreign income. Since much of this information is reflected in the Annual Information Statement (AIS) and Form 26AS, omissions can be easily identified during data matching exercises.
Capital Gains: A Frequently Missed Reporting Area
Another area where salaried taxpayers often make mistakes is capital gains reporting.
Investments in mutual funds, exchange-traded funds (ETFs), shares, employee stock ownership plans (ESOPs), and bonds can generate taxable gains upon redemption or sale. Even where tax liability is negligible or exempt, the transaction itself may still require disclosure in the return.
The increasing participation of retail investors in equity markets has made capital gains reporting one of the most scrutinized areas during tax assessments.
Cryptocurrency Transactions Are No Longer Invisible
The rapid adoption of cryptocurrencies among young professionals has introduced another layer of compliance complexity.
Many taxpayers continue to assume that cryptocurrency transactions remain outside the tax department’s visibility. However, regulatory reporting requirements and enhanced information-sharing mechanisms are gradually improving transparency in this segment.
Transactions involving Bitcoin, Ethereum, stablecoins, NFTs, and crypto-to-crypto swaps can have tax implications under India’s Virtual Digital Asset (VDA) taxation framework.
Currently, gains from VDAs are generally taxed at a flat rate of 30%, excluding surcharge and cess. Additionally, losses cannot typically be adjusted against other income streams, and deductions are restricted largely to the acquisition cost of the asset.
Even when no tax is payable, taxpayers should evaluate whether reporting obligations apply to their transactions.
Choosing the Correct ITR Form
Selecting the appropriate return form remains a critical yet often overlooked aspect of tax compliance.
A salaried individual earning only salary and interest income may generally be eligible to file ITR-1. However, the moment capital gains, foreign assets, cryptocurrency transactions, or substantial additional income sources enter the picture, taxpayers may need to shift to ITR-2 or ITR-3, depending on the nature of the income.
Using an incorrect return form can lead to processing issues and potential notices from the tax department.
Broad Guidance on ITR Selection
| Nature of Income | Relevant ITR Form |
| Salary and eligible interest income | ITR-1 |
| Salary with capital gains from shares or mutual funds | ITR-2 |
| Salary with foreign assets or overseas income | ITR-2 |
| Salary with cryptocurrency transactions | Generally ITR-2 |
| Salary with professional or freelance income | ITR-3 |
| Salary with business income, intraday trading, or F&O transactions | ITR-3 |
Taxpayers should review the latest eligibility conditions notified by the Income Tax Department before filing.
Documents Worth Reviewing Before Filing
Tax experts recommend that salaried taxpayers reconcile multiple records rather than relying exclusively on Form 16.A comprehensive review should ideally include:
- Form 16
- Form 26AS
- Annual Information Statement (AIS)
- Taxpayer Information Summary (TIS)
- Bank statements
- Mutual fund capital gain statements
- Stockbroker transaction reports
- Cryptocurrency exchange statements
- Home loan interest certificates
Reconciling these documents before filing can significantly reduce the likelihood of discrepancies and subsequent notices.
The Way Forward
The increasing use of technology by tax authorities is transforming tax administration from a document-driven process to a data-driven one. For salaried employees, this means that compliance is no longer limited to reporting salary income correctly.
A complete and accurate tax return today requires disclosure of all income sources, proper reporting of investment transactions, and selection of the correct return form.
As scrutiny mechanisms become more sophisticated, taxpayers who proactively reconcile their financial information and maintain adequate documentation are likely to face fewer compliance challenges in the future.
Important Due Dates for FY 2025-26 (AY 2026-27)
As of now, salaried taxpayers and other non-audit individuals filing ITR-1 or ITR-2 are generally required to file their Income Tax Returns by 31 July 2026. Taxpayers filing ITR-3 or ITR-4 in non-audit cases have a due date of 31 August 2026, while audit cases are generally required to file by 31 October 2026. Taxpayers who miss the original due date may still file a belated return, subject to applicable conditions, by 31 December 2026
About the Author
Keval Shah is the Founder of Shreyansh Consultants, Mumbai, specializing in Employees’Income Tax Return Filing, Risk Management, Financial Protection, and Personal Finance Advisory. He is an active member of the NetworkFP and JITO JBN Aagam – Goregaon Chapter.
Having conducted 25+ corporate employee awareness programs impacting 2,000+ participants, Keval is dedicated to simplifying personal finance, tax compliance, and financial decision-making for individuals and families. Through his advisory practice, he helps clients build financially secure futures while remaining compliant with evolving tax and regulatory requirements.
Vision: To empower individuals to achieve financial independence through informed decisions, disciplined planning, and ethical financial guidance that creates lasting value across generations.
Email:[email protected]
