With stricter validation checks and evolving tax return formats, a growing number of taxpayers across India are facing issues related to incorrect or incomplete Income Tax Return (ITR) filings. The consequence? A spike in ‘defective return’ notices under Section 139(9) of the Income Tax Act, leading to refund delays, penalties, and in some cases, returns being declared invalid.

In earlier years, any capital gains—whether taxable or exempt—made you ineligible to file ITR-1. Under the updated rules, you can now file ITR-1 if your only capital gains are modest (up to ?1.25 lakh) from stocks or equity mutual funds and you have no carry-forward losses. However, if your capital gains exceed ?1.25 lakh, filing ITR-1 will make your return invalid.
Such cases are promptly flagged by the tax department and a notice is issued, typically granting the taxpayer 15 days to rectify the error.

What Happens If You Don’t Act?
Failure to respond or correct the errors within the given timeframe can result in the return being treated as not filed at all. This can not only invite penalties but also cause indefinite delays in processing refunds.

The Income Tax Department on Monday launched large-scale search operations across the country targeting individuals and entities accused of facilitating fake tax deductions.

Raids are currently underway at more than 200 premises linked to people who allegedly helped taxpayers claim false deductions under various heads, including political donations, tuition fees, and medical expenses.

One of the primary areas of focus in this operation involves deductions claimed under Section 80GGC, which allows contributions to registered political parties to be deducted from taxable income.

Investigators allege that several intermediaries have been arranging bogus donations—sometimes routed through unregistered or dubious entities—to help taxpayers artificially lower their tax liability.

Apart from political donations, the raids are also targeting networks accused of enabling fraudulent claims on tuition fees, medical reimbursements, and other deductible expenses.

Income Tax refunds have jumped 474 per cent in the last 11 years to Rs 4.77 lakh crore in 2024-25, significantly outpacing the 274 per cent growth in gross tax collections, sources said on Sunday.

Also, there has been an 81 per cent decrease in number of days it takes to issue income tax refunds decreasing from 93 days in 2013 to just 17 days in 2024.

As of 2013-14, the last year of the UPA rule, refunds issued by the Income Tax department was at Rs 83,008 crore. Whereas, at the end of 2024-25, the 11th year of the ongoing NDA rule, I-T refunds stood at Rs 4.77 lakh crore, showing a 474 per cent growth during the period.

Gross direct tax collection grew 274 per cent to Rs 27.03 lakh crore as of 2024-25, from Rs 7.22 lakh crore as of 2013-14.

There has been a 133 per cent growth in I-T returns filed since 2013. A total of 3.8 crore ITRs were filed in 2013, which has risen to 8.89 crore in 2024.

The income tax returns (ITR) forms for AY 2025-26 require mandatory disclosure of the exact date of transfer for each asset for capital gains. The revised ITR forms include specific schedules for reporting capital gains with segregation based on transfer dates.

An asseesee must collect all transaction statements from brokers and investment platforms and segregate them based on whether the date of transfer is before or on/after July 23, 2024. He should consolidate sales of each transaction as equity, debt, real estate, gold, or other capital assets and calculate the tax rate accordingly.

The taxpayer should maintain proper sale records such as broker contract notes and mutual fund.

capital gain statements. Most importantly, he must cross-verify reported information with the annual information statement, tax information statement, and Form 26AS to avoid discrepancies.

Sandeep Sehgal, partner, Tax, AKM Global, a tax and consulting firm, says errors in reporting the date of transfer or incorrect classification of gains can result in mismatches while processing the tax return under Section 143(1).

A personal health insurance policy is critical at a time healthcare inflation in India is hovering around 14 percent. However, many senior citizens are unable to obtain one at affordable premiums due to advanced age and pre-existing diseases.

The hospitalisation, diagnostic and doctor consultation expenses that they incur, therefore, have to be paid for from their savings. Taking cognisance of such recurring, unavoidable expenses, the income tax rules offer some relaxation to taxpayers over the age of 60 years.

That is, such senior citizens can avail of the tax deduction under Section 80D of the Income-tax Act, which deals with health insurance premiums, even if they do not actually have a health insurance policy. Ensure that you claim these tax benefits at the time of filing income tax returns before the extended September 15 due date, provided you are choosing the old regime.

The Income Tax Department has finally released the Excel utilities of ITR Forms 2 and 3 for AY 2025-26 after 100 days passed since the start of the ITR filing season.

This has brought relief to crores of taxpayers who were not able to file their returns till now, especially those whose income was related to salary, house property, capital gains and business or profession.

What is the whole matter?
The process of filing income tax returns for the financial year 2024–25 started in May end, but only the utility of ITR-1 and ITR-4 was available that time. ITR-1 and ITR-2 utilities were released in late May and early June. At the same time, the utilities of the rest of the forms – including for ITR-2 and ITR-3 – were pending till now.

ITR-2 is usually filed by individuals whose income is from salary, more than one house property and capital gains.

ITR-3 is for those whose income is from business or profession, which sometimes involves complex details like foreign assets or share trading.

The Income-Tax Department relies on the registered mobile number and email ID for all important communications related to e-Filing. Taxpayers should ensure that their contact details on the income tax portal are valid, updated, and personally accessible. To maintain direct and secure communication, taxpayers must verify and update their contact information on the e-Filing portal at the earliest.

When updating contact details on the Income Tax e-Filing portal, taxpayers must now complete an additional step of e-verification. This added layer of security ensures that only the rightful owner updates the contact information. Taxpayers can choose from multiple e-verification methods, including Aadhaar OTP, Digital Signature Certificate (DSC), net banking, linked bank account, or demat account. One of these methods must be used to authenticate and successfully update the contact details.

House Rent Allowance (HRA) is a financial benefit that only salaried individuals can claim for tax deduction if their salary includes an HRA component. Even though you don’t need to submit proof in your Income Tax Return (ITR) to claim HRA benefits, taxpayers should still tread carefully. All HRA-related documents must be provided to the employer, and in the past, many employees have been caught submitting false information about HRA to their employers. This kind of dishonesty can cause troubles for the salaried employees.

Sometimes the information isn’t actually false but just a bit odd. For instance, a husband paying rent to his wife, who has no income other than that rent, and then claiming HRA tax exemption. While this can be allowed but at the same time it raises questions about the nature of the transaction and could lead to a more detailed examination (scrutiny).

The CBDT (Central Board of Direct Taxes) has successfully collected Rs 20,000 crore in pending dues during the first quarter of the current financial year, representing a twofold increase compared to the corresponding period last year. These collections were in response to demand notices issued by the income-tax department through March 31.

Officials indicate that collection efforts will become more rigorous in the upcoming months, with the department aiming to recover Rs 1.96 lakh crore this fiscal year. The tax authority is currently working to identify instances where taxpayers are suspected of income under-reporting or deliberate tax evasion.

Officials told ET that the recovered amount had Rs 17,244 crore in corporate tax, Rs 2,714 crore in personal income-tax, and Rs 180 crore from inadequate or non-payment of tax deducted at source.

The Income Tax Department has made Aadhaar-based OTP verification mandatory for updating email ID or mobile number on the income tax e-filing portal by taxpayers.

This move is seen as an attempt to prevent unauthorised changes to one’s profile with the Income Tax Department. This will also ensure that only the rightful taxpayer can modify their contact details, effectively curbing attempts by miscreants to hijack accounts or divert communication.

Also, Aadhaar has been made mandatory for submitting PAN applications from July 1. It has become mandatory to provide Aadhaar number and get it authenticated to get a new PAN (Permanent Account Number).

Under the Central Board of Direct Taxes (CBDT) new rule, a PAN application will be considered valid only when the applicant’s Aadhaar number is registered and it is confirmed online.

The Income Tax Department has notified the income tax return (ITR) forms for FY 2024-25 (AY 2025-26). But, although software utilities for ITR-1 and ITR-4 have been released by the tax department, it still hasn't rolled out the software utilities for ITR-2 and the other ITR forms. Non-Resident Individuals (NRIs) mainly use ITR-2 to file their tax returns.

For FY 2024-25 (AY 2025-26), there have been quite a few updates in the Income Tax Act, 1961, such as new capital gains regulations and changes in the income tax slabs. This might leave NRIs wondering how these changes will affect their ITR filing.

ET Wealth Online explains the four updates that will affect ITR filing by NRIs in FY 2024-25 (AY 2025-26)

1) Threshold for reporting assets and liabilities increased: The government has increased the threshold for reporting assets and liabilities for individuals who would be filing ITR-2. Tarun Garg, Director, Deloitte India, says, "According to the new rule, an NRI filing ITR-2 is required to report his/her assets and liabilities only if his/her gross taxable income exceeds Rs 1 crore in FY 2024-25. It is important to note that NRIs are required to report their Indian assets and liabilities in ITR 2. Foreign assets and liabilities are not required to be reported by an NRI in the ITR-2 form."

Many taxpayers who have claimed deductions under Section 80GGC of the Income Tax Act, 1961, have received income tax notices. The Income Tax Department has enabled a new facility on its portal, allowing taxpayers who have received notices under Section 158BC of the Income Tax Act, 1961 on how to respond to such notices.
What is Section 80GGC?
Section 80GGC of Income Tax Act, 1961, allows individual taxpayers to claim deductions for contributions made to political parties or electoral trusts. These deductions encourage transparent political contributions and have specific eligibility criteria, documentation requirements, and deduction limits. Understanding the features and procedures of Section 80GGC helps taxpayers maximize benefits while complying with tax regulations.

However due to rising instances of fake claim being made, the income tax department has taken this new initiative to curb the misuse of this deduction.

Months ahead of the 15 September 2025 deadline for filing income tax returns for FY 2024–25, the Income Tax Department has launched a support service called ‘TAXASSIST’ to help taxpayers with queries and notices during the current filing season.

As part of this campaign, the Income Tax Department sends messages or emails to taxpayers, reminding them of important notices or other tax-related actions.

Describing the latest initiative, the Income Tax Department said: “Introducing TAXASSIST, your go-to support for all tax concerns! From helping you navigate departmental communications and keeping your finances in check, to reminding you of key tax deadlines. This campaign is designed to guide, support, and simplify.”

The post shared an example highlighting three scenarios in which a taxpayer claimed a deduction under Section 80GGC—a provision that allows tax deductions for donations made to political parties or electoral trusts. The Income Tax Department outlined these scenarios to show how TAXASSIST can assist taxpayers in managing and responding to 80GGC-related claims.

The income tax returns (ITR) filing for AY 2025-26 started at the end of May this year, and so far, more than 75 lakh returns have been filed. Of these, about 71.1 lakh returns have been e-verified, according to the details shared by the I-T department on its official website. Earlier, the number of ITRs processed used to be updated regularly on the website, but now that data is no longer visible. Here’s a screengrab of the webpage where the section is now showing blank. The number of ITRs processed used to appear just below the number of ITRs verified.

Your ITR processing and tax refunds may take time this year – know why
Tax experts are of the view that the Income Tax Department will issue refunds only after it fully examines the assessment reports and old tax returns of the past years.

This year, the income tax return filing too started quite late at the end of May, almost with a month’s delay. And now ITR processing and refunds are said to be taking time.

Look out for random alphabets scribbled on a piece of paper or long strings of what may seem like gibberish, sprinkled with alpha numerals. Watch out for ‘wallet.dat’ or 'key.dat' files and pen drives tucked in closets. Gently remind a person of interest of possible imprisonment for holding back passwords they have memorised instead of jotting them down somewhere -- a trick that techies call ‘brain wallets’.

As cryptocurrencies are increasingly used to store and hide wealth, tips like these are being passed on by the Income tax (I-T) department to its investigators to trace and freeze this complex, little-understood digital asset. Tax officials, many of whom are probably innocent of cryptos, are being groomed to spot the clues they may stumble upon during a search and seizure operation. They are told not to mistake certain files and notings that may hold the keys to cypoto wallets, as irrelevant information or meaningless griffonage.

The Appointments Committee of the Cabinet on Saturday said that it ha approved the re-appointment of Ravi Agrawal, as Chairman of the Central Board of Direct Taxes (CBDT), the apex policy-making body of the Income Tax Department.

His re-appointment is on a contract basis for a period of one year, effective from July 1, 2025, to June 30, 2026, or until further orders, whichever is earlier.

The terms of his service will follow the usual conditions applicable to re-employed Central Government officers, the government said in a notification.

Agarwal, a 1988 batch Indian Revenue Service (IRS) officer from the income tax cadre, has been serving as a member, CBDT (Administration), since July 2023.

He succeeded Nitin Gupta, 1986 batch IRS officer (IT), in June 2024 as Chairman of the tax body.

Filing your Income Tax Return (ITR) is only the beginning of the compliance journey. The more challenging part could be if you receive a notice from the Income Tax Department for any potential error or mismatch of data in your ITR filing.
It's important for taxpayers to know how to respond to an income tax notice effectively and avoid potential complications.
Why Scrutiny Is Tighter This Year
The Income Tax Department has picked nearly 1.65 lakh cases for scrutiny for Assessment Year (AY) 2026, which is three to four times more than usual.

Of these, over one lakh scrutiny notices have already been served under Section 143(2) of the Income Tax Act. This section empowers the I-T Department to conduct a detailed assessment of the return if it finds discrepancies or high-risk financial behaviour.

The CBDT has directed Income Tax Department officials across the country to ensure "due application of mind" while issuing notices for scrutiny and assessment of a taxpayer's return, emphasising that all queries should be "relevant" and "specific".

The policy-making body for the direct taxes administration has also asked all the region heads (PCCIT or principal chief commissioners of I-T) of the department to have an "effective supervision" over their assessing officers and make sure that questions sent by them to a taxpayer are "justified" and that "irrelevant" queries are completely avoided.

PTI has accessed a communication sent by the office of Central Board of Direct Taxes (CBDT) Chairman Ravi Agrawal to the PCCITs, directing them that queries sent by FAOs (faceless assessing officers) to the taxpayers should be "relevant", "specific" and "grounded" in the specific circumstances of the case in question.

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.

Finance minister Nirmala Sitharaman on Monday directed income tax (I-T) officers to accelerate the disposal of disputed tax demands, timely process tax refunds, and proactively resolve taxpayer grievances.

Chairing the Conclave of Principal Chief Commissioners of Income-tax (Pr.CCsIT) here, she said that all departmental appeals falling below the revised monetary thresholds as notified in recent policy changes should be identified and withdrawn within a period of three months.

Sitharaman also commended the Central Board of Direct Taxes (CBDT) for its work in drafting the new income tax Bill, which successfully embodies the Prime Minister’s vision of simplification and clarity in laws. She asked the department to be prepared to conduct nationwide awareness and capacity-building programmes once the Bill is duly passed by the Parliament.