In FY2024-25, two co-founders sold their stakes in a start-up to a large corporation. One co-founder received Rs 75 lakh in total, while the other got Rs. 45 lakh. Both filed their income tax returns (ITRs) on time in ITR-2 and declared the capital gains.

When December began, the first co-founder received an automated message from CPC about a significant mismatch in his tax return. To his surprise, the other co-founder got no such communication, and his ITR was processed smoothly. Automated Tax Matching Systems used by the CPC are the main reason for this difference in how the same transaction is treated.

The Automated Tax Matching Systems use machine-learning-based algorithms to reconcile the income and tax details reported by a taxpayer in their Income Tax Return (ITR) with a vast array of financial data and the AIS. In case of any mismatch, an automated notice is sent to the taxpayers. The mismatch could be due to many reasons, such as non-reporting of income or improper disclosure.

When Mr. Rao surrendered his three unit-linked insurance policies (ULIP's), which he had bought from Bajaj Allianz Life Insurance 14 years ago for Rs 75 lakh, he ended up with net long term capital gains of Rs 3.22 crore. However, Rao made a mistake in his income tax return (ITR). He incorrectly categorized this Rs 3.22 crore LTCG from ULIP surrender under as capital gains income instead of income from other sources.

As a result, the tax department issued him a notice, and eventually, the tax officer slapped a penalty of Rs 2.48 crore on him.
Rao decided to contest this, first in CIT (A) and later in the Income Tax Appellate tribunal (ITAT) Hyderabad. On November 19, 2025, he won the case in ITAT Hyderabad. Advocate H Srinivasulu represented him.

Waiting for an income tax refund can test anyone’s patience. For many taxpayers, the delay feels even more frustrating when they expect interest on the amount due. While the Income Tax Act does allow interest on delayed refunds, the benefit does not apply in every case.

Interest on delayed refunds is paid at 6% per annum under Section 244A of the Income Tax Act. It is calculated from April 1 of the assessment year until the day the refund is credited. However, there are clear situations where taxpayers may not receive this interest, even if the refund is delayed.
WHY REFUNDS ARE FACING DELAYS
Refund processing has slowed down due to a mix of compliance checks and data issues. Common problems include incorrect bank details, Aadhaar–PAN linking errors and wrong claims made in returns.

The Income Tax Department has clarified that the emails recently sent to taxpayers over mismatches between income tax return (ITR) disclosures and financial transactions are only “advisory” in nature and not for penalty or scrutiny.

The clarification comes after many taxpayers reported receiving emails and SMS alerts flagging high-value transactions linked to their PAN that were either not reported in their ITRs or appeared disproportionate to their declared income.

In an official statement, the department said, “Some references have come to the notice of the Income Tax Department regarding recent communication sent to taxpayers pertaining to transaction(s) made by them.”

India’s net direct tax collections rose 8% to Rs 17.05 lakh crore so far in the current financial year, helped by steady growth in corporate tax receipts and lower refunds, official data showed Friday.

Data released by the Income Tax department showed that net collections between April 1 and December 17, 2025, stood at Rs 17,04,725 crore, compared with Rs 15,78,433 crore in the same period last year. Gross direct tax collections grew 4.16% year-on-year to Rs 20,01,794 crore.

Corporate tax collections remained the biggest contributor, with net corporate tax rising to Rs 8,17,310 crore, up from Rs 7,39,353 crore a year ago. Net non-corporate tax collections, which include taxes paid by individuals and other entities, increased to Rs 8,46,905 crore from Rs 7,96,181 crore.

Taxpayers who donate to charitable organisations can claim tax deduction under Section 80G of the Income Tax Act, 1961in the old tax regime. To help taxpayers understand how Section 80G tax deduction works, the tax department released many Frequently Asked Questions (FAQ) on December 19,
ules/2025
2025.

S. Sriram, Executive Partner, Lakshmikumaran and Sridharan attorneys, said to ET Wealth Online: "The FAQs highlight the broad legal principles and procedural regulations relating to claiming donations to eligible institutions as deduction in income tax returns. But read with the "NUDGE" campaign and recent press release of the CBDT, the intended effect of the FAQ is much more than the clarifications given therein. The FAQ is a guidance note by the CBDT to tax payers to test their claim for deduction for donations, against the principles explained in the FAQ."
FAQS to Section 80G- Tax deduction for donation What is Section 80G of the Income Tax Act, 1961?
Section 80G provides for a deduction in computing the total income of an assessee in respect of donations to certain funds, charitable institutions, etc.

The December-quarter installment of advance taxes showed a marginal improvement over the previous two quarters, but lagged the year-ago growth by a wide margin. The overall direct tax receipts significantly lagged Budget projections, increasing the chances of significant shortfall in tax revenue collections in FY26, latest set of official data showed.

The Centre’s advance tax collections for the third quarter of 2025-26 (Q3) from companies, LLPs and individuals rose by 4.27% on year, compared with a 20.9% growth seen in the year-ago quarter, owing largely to the massive personal income tax relief announced in the Budget. In absolute terms, Q3 advance tax collections stood at Rs 7.88 lakh crore as on December 17, according to data released by the Central Board of Direct Taxes (CBDT).

Personal Income Tax Gap
While advance taxes paid by corporate assesses rose nearly 8% to Rs 6.07 lakh crore in Q3, collections from the non-corporate sector declined 6.5% to Rs 1.81 lakh crore. The non-corporate tax includes taxes paid by individuals, HUFs, firms, local authorities, artificial juridical persons etc.

The Income Tax Department has stepped up its efforts to bring more people into the tax net by closely tracking high-value financial transactions carried out by individuals and entities who do not file income tax returns, Parliament was informed recently.

As part of this effort, the Central Board of Direct Taxes (CBDT) has rolled out a Non-Filer Monitoring System (NMS). The system uses data analytics to identify people who have undertaken large financial transactions but have not filed their income tax returns, the Finance Ministry said in a response to a query in the Rajya Sabha.

According to the Finance Ministry, the NMS brings together information received from multiple third-party sources such as banks, financial institutions, registrars and other reporting entities. This includes data from Statement of Financial Transactions (SFT), Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) filings.

On December 18, 2025, at 5.58 PM, the
Income Tax Department announced that they have received some references regarding recent communications sent to taxpayers regarding their transaction(s).

The income tax department is referring to the automated intimations via email being sent to many taxpayers about AIS mismatch, property transaction, foreign income, foreign asset, car purchases, etc.

The Income Tax Department said: "Taxpayers may please note that such communication is to facilitate the taxpayers & make them aware of the information available with the ITD regarding the transactions reported by the Reporting Entities during the year."

Section 14A of the Income Tax Act, 1961 prevents taxpayers from claiming any tax deductions for expenses related to income that is exempt from income tax, which is known as disallowance.
The main reason for this is that expenses linked to tax-free income can't be deducted from taxable income. However, when a taxpayer tried to do just that-claiming Rs 50 lakh disallowance on Rs 81 crore of tax-exempt income-the income tax department issued a notice and added Rs 17 crore to the taxpayer's income under Rule 8D of the Income Tax Rules, 1962.

The background of this case is that the taxpayer reported a tax-exempt income of Rs 81.567 crore in their income tax return (ITR) and claimed finance costs of Rs 117.28 crore. In the ITR, the taxpayer disallowed Rs 49.51 lakh under Section 14A based on a certificate from a chartered accountant dated March 19, 2021. The CA confirmed that the common indirect expenses amounted to Rs 1.874 crore.
The taxpayer's auditor also noted that the exempt income made up 18% of the total income declared, so he suggested disallowing direct expenses of Rs 15.41 lakh along with 18% of the indirect expenses of Rs 1.874 crore as the disallowance under Section 14A. Consequently, the taxpayer reported a total disallowance of Rs 49,51,789 in the ITR.

The Income Tax Department is reaching out to taxpayers with bulk emails about disclosing foreign assets/income information for the Calendar Year 2024. The intimations are based on data received from foreign jurisdictions under international information-sharing arrangements such as CRS, FATCA and AEOI.

Taxpayers who have received these e-mails now need to report this income in revised ITR by December 31, 2025.

But which foreign assets should they report? Who needs to report these assets? And what happens if someone doesn't report these assets in a revised ITR? Let's check out what the chartered accountants have to say about it.-

The Income Tax Department has uncovered a network of agents who facilitated the filing of income tax returns with fraudulent deductions and exemptions, enabling taxpayers to unlawfully lower their tax liability and secure illegitimate refunds.

According to an Income Tax Department statement, investigations revealed that some intermediaries had created pan-India agent networks that filed returns on a commission basis by inflating or fabricating deductions under the Income Tax Act. A large number of these bogus claims were linked to donations made to Registered Unrecognised Political Parties (RUPPs) and certain charitable institutions, as per the Income Tax Department.

What does Income Tax Department's action against such offenders mean?
"Recent CBDT advisories reflect a clear policy intent to curb artificial tax planning and deter bogus claims through an integrated approach combining advanced data analytics, third-party verification, and stringent penal measures," says Sandeep Bhalla, Partner, Dhruva Advisors.

On November 25, 2025, the Income Tax Appellate Tribunal (ITAT) Ahmedabad, held that if the source of funds from a property sale is clarified and qualifies for capital gains tax exemption, then the related tax exemptions under Section 54 and 54EC cannot be denied.

This judgement was announced in a case filed by Mr. Patel from Ahmedabad. During the Assessment Year 2019-20, Patel did not file any income tax return (ITR). Subsequently his case was flagged by the income tax department's risk management system on the basis of information indicating that he had entered into significant financial transactions exceeding taxable limits during the year.

The flagged information pointed to an alleged unaccounted cash investment in real estate totalling Rs 48.898 lakh. The income tax Assessing Officer noted that the evidence supporting this information was discovered during a search under Section 132 conducted on February 10, 2022, at certain real estate companies, and that the seized material included details about several individuals including Mr. Patel.

Over the last week, many taxpayers have been getting emails from the Income Tax Department about high-value transactions linked to their names. The catch is, they either didn't report these transactions or the transaction value or amount are way more than their reported income.

ET Wealth Online reached out to several chartered accountants and gathered information about these intimations. These intimations are not tax notices, but rather a nudge for taxpayers to file a revised/belated ITR if they think they might have missed reporting on certain income. The key point here is income, as some CAs told us that many taxpayers are worried about this intimation since they made high value purchases.
The Income Tax Department had said this in the past (2023): "Taxpayers may note that such communication is to facilitate the taxpayers & make them aware of the information available with the ITD regarding the transactions reported by the Reporting Entities during the year."

The Central Board of Direct Taxes (CBDT) has stepped up its efforts to curb bogus deduction and exemption claims, nudging taxpayers to voluntarily correct their income tax returns before stricter action follows.

In a recent move, the Income Tax Department has acted against several intermediaries and return filers who were found helping taxpayers claim fake deductions and refunds under the Income Tax Act. These intermediaries allegedly operated through a wide network of agents across the country, filing returns with incorrect claims on a commission basis, the Income Tax Department said in a release on December 13.

How bogus deduction claims were made
Investigations revealed that a large number of false claims were routed through donations to Registered Unrecognised Political Parties (RUPPs) and certain charitable institutions under Sections 80G and 80GGC of the Income Tax Act.

India and France have struck a deal to revise their 1992 treaty which will halve the tax on dividends paid by Indian units to French parents, potentially saving millions for companies with major operations in the South Asian nation, documents show.

In return, India will get to widen its powers to tax share sales by French investors, and revoke the “most favoured nation” status of France that gave it certain tax advantages, according to confidential Indian government documents reviewed by Reuters.

Bilateral trade between India and France stood at $15 billion last year, and Indian Prime Minister Narendra Modi and French President Emmanuel Macron have been forging warmer ties. The two sides have been working to recast their tax treaty since 2024 to modernize it by adapting global standards on tax transparency.

With the Income-tax Act, 2025 (the New Act) set to kick in on April 1, 2026, the upcoming Finance Bill, 2026 gives us an opportunity to re-think how India handles tax enforcement, especially regarding offences that could lead to prosecution.

The NITI Aayog's recently published working paper on tax policy, "Towards India's Tax Transformation: Decriminalisation and Trust-Based Governance," has proposed a detailed framework to rationalise and modernise criminal provisions under the Income-tax Act. The Finance Ministry should take a close look at the recommendations in this paper while putting together the Finance Bill, 2026, especially to make the criminal provisions in the New Act easier to understand.
Balancing Trust and Enforcement
India's tax administration has evolved significantly - with centralised processing of returns and refunds, automated case selection, faceless assessments and appeals, the Annual Information Statement (AIS), simplified ITR forms, and pre-filled returns all making it easier for people to comply.

Many taxpayers who have already filed their Income Tax Return (ITR) are now facing a serious problem: when attempting to file their revised ITR form, information about their Schedule Foreign Assets (FA), Foreign Source Income (FSI) or Tax Relief (TR) schedule is missing. In a social media post on X (formerly Twitter), the Income Tax Department tells what such taxpayers should do.

If a taxpayer has any assets outside of India, such as immovable property, bank accounts, investments, or other assets, or earns income from foreign sources, careful attention must be paid during the Income Tax Return filing process.

Why you can't see the schedule FA/FSI/TR in revised form
After filing ITR-1 or ITR-4 forms, if you are unable to find information about schedule foreign assets, foreign source income while in your revised ITR form, it may be because you had filed a wrong form for reporting foreign assets/income.

The Modi government last month implemented the 4 Labour Codes, which, among several other things, are expected to reshape how salaried Indians earn, save and pay taxes. These Codes are – Code on Wages, Industrial Relations Code, Social Security Code, and Occupational Safety, Health & Working Conditions (OSHWC) Code. The third Code – Social Security Code – deals with various laws related to employees’ social security benefits and schemes like EPF, gratuity and other schemes. The Code also brings clarity with regard to the definition of ‘wages’ under the new law.

By redefining what counts as “wages” and mandating that basic pay should form at least 50% of salary, these laws may reduce your monthly take-home, but they also strengthen your long-term wealth and improve tax efficiency.

The government’s aim is clear. As per the notification, “Wages” now include basic pay, dearness allowance, and retaining allowance; 50% of the total remuneration (or such percentage as may be notified) shall be added back to compute wages, ensuring consistency for gratuity, pension and social security benefits.

The government has told Parliament that over 44,000 tax notices have been issued to people who traded in crypto but did not report it in their Income Tax Returns.

This single number shows how large the unreported trail is — thousands of investors bought and sold digital assets, but their gains never made it to official records.

Crypto unregulated, but not unwatched
India does not have a law specifically regulating cryptocurrencies yet. The government says crypto assets are inherently borderless, so regulating them locally without global alignment may not work.

“Crypto-assets/Virtual Digital Assets (VDAs) are unregulated in India, and the government does not collect data on them. As these assets are inherently borderless, they require strong international coordination to prevent regulatory arbitrage. Therefore, any regulatory framework for crypto assets can be effective only with significant international collaboration on the evaluation of the risks and benefits and the evaluation of common taxonomy and standards,” the government said replying to queries around crypto regulations.