29 jan 2024

Updated: May 2026

Financial Foresight 2026: Avoid These Mistakes for a Stronger Financial Year

Every financial year brings its own set of opportunities and pitfalls. As we move through FY2026, the regulatory landscape has shifted materially — new tax slabs under the revised regime, updated LTCG provisions, GST clarifications, and FEMA amendments all demand fresh attention. At Regi Tom Antony And Associates, we see the same avoidable mistakes repeated year after year. Here is our practical guide to getting your finances right in 2026.

Mistake 1: Not Choosing the Right Tax Regime

Since FY2024–25, the new tax regime is the default under Section 115BAC. If you do not explicitly opt for the old regime in your ITR, the new regime applies. The new regime offers lower slab rates but disallows most deductions (80C, 80D, HRA, LTA, etc.).

Who benefits from the new regime: Salaried individuals with limited investments, those with lower deductions, and high earners where the slab rate differential outweighs lost deductions.

Who should consider the old regime: Individuals with significant 80C investments (PPF, ELSS, home loan principal), HRA claims, and substantial 80D (health insurance) premiums.

Run a comparative calculation before filing — do not default without analysis.

Mistake 2: Missing Advance Tax Deadlines

Advance tax is payable in four instalments (15 June, 15 September, 15 December, 15 March) for individuals with tax liability exceeding ₹10,000 after TDS. Missing these attracts interest under Sections 234B and 234C.

Common triggers people miss: capital gains on mutual fund redemptions or property sale, freelance/professional income, rental income, and gains from cryptocurrency or digital assets (taxable at 30% under Section 115BBH with no set-off allowed).

Mistake 3: Ignoring Capital Gains Tax Changes

The Finance (No. 2) Act, 2024 significantly revised capital gains rates effective 23 July 2024:

• LTCG on listed equity / equity MFs (Section 112A): 12.5% (up from 10%), exemption threshold raised to ₹1.25 lakh per year
• STCG on listed equity (Section 111A): 20% (up from 15%)
• LTCG on property and unlisted assets: 12.5% without indexation benefit (indexation removed for assets acquired after 23 July 2024)

Planning asset sales without accounting for these revised rates can result in significant unexpected tax liability.

Mistake 4: Not Disclosing Foreign Assets (Schedule FA)

Indian residents (including returning NRIs who have become resident) must disclose all foreign assets, accounts, and income in Schedule FA of ITR. This includes:

• Foreign bank accounts (NRO/FCNR after becoming resident)
• Overseas equity holdings, mutual funds, ESOPs from foreign employers
• Foreign real estate
• Beneficial interests in foreign trusts

Failure to disclose attracts penalties of ₹10 lakh per assessment year under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. This is an area of increasing scrutiny given FATCA/CRS data exchange.

Mistake 5: Incorrect TDS Compliance for Businesses

TDS defaults are one of the most common triggers for demand notices for small businesses and professionals. Common errors:

• Not deducting TDS on rent above ₹50,000/month (Section 194IB — even individuals/HUFs must deduct)
• Missing TDS on contractor payments under Section 194C
• Incorrect TDS rates for NRI payments — Section 195 requires TDS at applicable rates (often 20%+ surcharge) on payments to non-residents
• Delayed TDS deposit attracting 1.5% per month interest under Section 201

Mistake 6: Missing GST Annual Return and Reconciliation

GSTR-9 (Annual Return) is due by 31 December of the following financial year. GSTR-9C (Reconciliation Statement) is required for taxpayers with aggregate turnover above ₹5 crore. Common errors that attract notices:

• ITC claimed in GSTR-3B not matching with GSTR-2B auto-populated data
• HSN summary errors in GSTR-1
• Failure to reverse ITC on exempt supplies under Rule 42/43

Mistake 7: Inadequate Insurance Coverage

A perennial financial planning gap: underinsurance. With India's healthcare inflation running at 12–14% annually, a health insurance cover that seemed adequate three years ago may be grossly insufficient today. Review:

• Health insurance sum insured — ₹10 lakh minimum for a family of four in a metro city
• Term life cover — typically 10–15x annual income; review if income has grown significantly
• Professional indemnity for consultants and self-employed professionals

Mistake 8: NRIs Ignoring Indian Tax Compliance

Many NRIs assume their Indian income is automatically exempt or that their employer abroad handles everything. In reality:

• Rental income from Indian property is taxable in India and requires ITR filing if it exceeds basic exemption
• Interest on NRO accounts is taxable; TDS is deducted at 30% but the net liability needs ITR filing for lower rate claims under DTAA
• Capital gains on Indian property sales attract TDS under Section 195 and require ITR filing
• The deemed residency rule (Section 6(1A)) can make a high-income NRI resident in India even if physically abroad — consult a CA if your Indian income is substantial

For NRI-specific tax and compliance guidance, visit www.nriblueprint.com or read NRI Tax Blueprint 2025 by CA Regi Tom Antony — available on Amazon.

Mistake 9: No Succession or Estate Plan

Most Indians — residents and NRIs alike — have no will. Dying intestate means assets are distributed per the Hindu Succession Act, 1956 or the Indian Succession Act, 1925, which may not align with your wishes. A simple will, combined with nominations in bank accounts, demat accounts, insurance policies, and EPF/PPF, can prevent significant legal and family complications.

Mistake 10: Not Engaging a CA Year-Round

Tax planning is not a March activity. Advance tax planning, LTCG harvesting, choosing between regimes, structuring a business sale — these decisions need to be made during the year, not after year-end when options are closed. A Virtual CFO or year-round CA engagement provides proactive guidance when it matters. For more, visit www.smeadvisory.in.

Frequently Asked Questions

Is the new income tax regime mandatory from FY2025–26?

The new regime is the default — it applies automatically unless you opt out. Salaried employees can opt out by submitting a declaration to their employer. Self-employed individuals and businesses must opt out by filing Form 10-IEA before the ITR due date. Once you opt out, the choice for that year is final.

What is the penalty for not filing ITR if TDS has already been deducted?

Even if TDS covers your full tax liability, you may still be required to file an ITR if your gross income exceeds the basic exemption limit (₹3 lakh under new regime, ₹2.5 lakh under old regime). Non-filing attracts a late fee of ₹1,000 (income up to ₹5 lakh) or ₹5,000 (income above ₹5 lakh) under Section 234F, plus potential interest on unpaid tax.

How are cryptocurrency gains taxed in India in 2026?

Virtual Digital Assets (VDAs) including cryptocurrency are taxed at a flat 30% under Section 115BBH, regardless of holding period. No deductions except cost of acquisition are allowed. Losses from VDAs cannot be set off against any other income. TDS at 1% applies on transfers above ₹10,000 per year (₹50,000 for specified persons) under Section 194S.