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ITR Mismatch Alert: Govt to Auto-Compare Your Tax Returns from 2025—What You Must Know

ITR Scrutiny to Get Tighter from FY 2025-26 | New Rule Explained with Real-Life Scenarios

The Income Tax Department is tightening its compliance net—starting FY 2025-26, your current year ITR will be auto-compared with your previous year’s return to flag discrepancies. This new mechanism was recently introduced in the Finance Bill 2025 and has already started trending among tax professionals and salaried individuals alike.

If your income sources, deductions, or TDS suddenly vanish or shift drastically from one year to the next, you may face automated notices or be asked for clarification—even if you’re not under scrutiny manually.

Let’s dive into what this rule means for you, how it works, and how to protect yourself from unwanted tax hassles.

Table of Contents

  1. What Is the New ITR Comparison Rule?
  2. Why Has This Rule Been Introduced?
  3. Real-Life Scenarios Where You May Get Flagged
  4. How to Ensure Compliance Going Forward
  5. FAQs on ITR Mismatch and Scrutiny

1. What Is the New ITR Comparison Rule?

Under the new provisions in the Finance Bill 2025, the Central Board of Direct Taxes (CBDT) will start automated cross-checks of your current year ITR with:

  • Previous year’s declared income,
  • Sources of income (e.g., Salary, Capital Gains, House Property),
  • Claimed deductions and exemptions,
  • And TDS as per Form 26AS and AIS (Annual Information Statement).

If a major deviation is noticed, your ITR may be flagged for review and you may receive an e-notice asking for clarification under Section 133C or Section 143(1)(a).

2. Why Has This Rule Been Introduced?

The government has cited two key reasons:

  • Increasing cases of false deduction claims: Many individuals claim high 80C, 80D, or housing loan deductions one year, then skip them the next—raising red flags.
  • Sudden shifts in income: People showing high freelance, rent, or business income in one year and “nil” in the next, often due to informal payments, are under watch.

This move is expected to reduce tax evasion, increase voluntary compliance, and detect high-risk taxpayers early.

3. Real-Life Scenarios Where You May Get Flagged

Scenario 1: Salary Income Vanishes

FY 2023-24: Salary shown as ₹12 lakh
FY 2024-25: No salary declared, and no reason provided
→ Likely to get flagged unless job loss or sabbatical is explained

Scenario 2: Deductions Drop to Zero

FY 2023-24: 80C of ₹1.5 lakh, 80D of ₹50k
FY 2024-25: No deductions claimed
→ CBDT may send a notice asking why the claim pattern changed drastically

Scenario 3: Capital Gains Discrepancy

FY 2023-24: Declared LTCG of ₹4 lakh from shares
FY 2024-25: No gains shown, but AIS shows large stock sales
→ Mismatch will trigger notice; explanation or correction needed

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4. How to Ensure Compliance Going Forward

Here’s a checklist to stay tax-smart under this new regime:

  • ✅ Check AIS & Form 26AS before filing
    Make sure the data matches with your declared sources and income.
  • ✅ File ITR accurately, even if TDS already deducted
    TDS does not mean the department won’t check your return.
  • ✅ Keep documentation for every major deduction or exemption
    Medical bills, rent receipts, home loan interest certificates, etc.
  • ✅ Mention reasons in the ITR filing utility if income has fallen drastically
    For example: “Unemployed during FY 2024-25” or “Income shifted to spouse’s account post transfer of asset.”

5. FAQs on ITR Auto-Comparison & Notices

Q1: Will everyone’s ITR be compared or only high-income individuals?

Everyone’s return will undergo automated checks—especially salaried and business individuals earning ₹5 lakh+.

Q2: What if I honestly forgot to report a source of income?

You can revise your return before the deadline. Ignoring it may lead to penalty under Section 270A.

Q3: Will this apply for AY 2024-25 filing in July 2025?

No. This applies from FY 2025-26 onward (i.e., AY 2026-27), but it’s wise to start preparing now.

Q4: Will refunds be delayed due to this auto-check?

Not necessarily. If your return is consistent and clean, refund processing will remain smooth.

Final Words

This new rule is a reminder that tax filing is no longer just about this year—it’s about consistency over time. If you often file casually or leave things out, this is your cue to tighten the screws.

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