The Income Tax Return (ITR) filing for the financial year 2024-25 (Assessment Year 2025-26) has picked up pace with more than 60 lakh ITRs filed so far. Nearly 1 lakh returns have been processed, as per data available on the Income Tax Department’s website. Meanwhile, the department has implemented new guidelines for ITR scrutiny this year. Tax authorities have been told to intensify the crackdown on tax evasion – and their biggest weapon to help in this is data analytics, say tax experts.
Now, taxpayers’ bank accounts, spending habits, investment patterns and their declared income – all these are being investigated by linking them together. Special attention is being paid to those people whose bank accounts show less cash transactions, but they are spending big amounts on real estate, foreign travel or luxury brands.
Scrutiny framework being created with data analytics and AI
According to reports, the Income Tax Department is also sending notices to individuals whose fund movement in bank accounts is relatively low, but their expenses are high-profile. The government is now investigating such “mismatch” cases on priority in which the person has shown less income in the return but is spending a lot on the ground, experts said.
Travel, gold purchase, mutual fund or property investment – scrutiny is being done on the basis of all these data points. The tax department is no longer of the opinion that only big businessmen or companies evade taxes. Now the focus is also on such common people who show less income but live a “high standard” life, reports suggest.
The government is now using real-time data analysis to see who is spending how much and how much they are declaring in their ITR. Spending more than Rs 10 lakh in a year through credit card, property transactions of more than Rs 30 lakh, cash deposits of more than Rs 2 lakh — all these high-value transactions are now being scanned.
New rules applicable for ITR scrutiny in FY 2025-26
Under the new scrutiny rules issued by the Income Tax Department for FY 2025-26, investigation will be done compulsorily in some cases. These are the main grounds:
CS01: Investigation of tax survey cases
If a survey has been done under section 133A, then your ITR will be taken under scrutiny.
CS02 and CS03: Search and seizure cases
All ITRs of those whose tax raids were conducted or documents were seized between 1 April 2023 and 31 March 2025 will be under special surveillance.
CS05: Cases of repeated undeclared income
If you had previously hidden a large income and did not report it, then the next return will go directly to investigation. The limit has been set at Rs 50 lakh in metro cities and Rs 20 lakh in non-metro.
CS06: On receiving information from CBI or ED
If any input is received against a taxpayer from CBI, ED or other agencies, then his return will come under scrutiny.
Common mistakes that can lead to scrutiny
Not disclosing interest income from FD or savings account
Wrong TDS claims
Claiming exemptions for which valid documents are not available
Not declaring income from investments made in the name of wife or children
Note: Under Section 64 of the Income Tax Act, if you have invested your money in the name of a family member, then the tax liability for that will be yours.
Getting a notice is no longer just a mistake, it is an analysis of the entire behaviour
Tips for ITR filers
Make sure to match your Form 26AS, AIS and bank statements
Declare all income, even if small, honestly
If you do business, keep a complete record of cash transactions
If you are pursuing expensive hobbies, declare the source of income too
Summing up…
With new technology, data analytics and strict rules, the Income Tax Department is no longer in a mood to tolerate any ‘disconnect’. If there is a difference between your declared income and expenses, then ITR scrutiny may soon knock at your door. This is the time to pay taxes transparently – otherwise a notice is certain.
