In a striking example of how artificial intelligence (AI) and digital forensics are revolutionising tax enforcement, the Income Tax Department has detected a fraudulent claim involving fake improvement bills used to evade capital gains tax. The case centres on a Hyderabad-based taxpayer who sold an immovable property for Rs 1.4 crore, but dramatically slashed his tax liability using falsified documents, according to TOI report.

Suspicion raised over 2002 expense bill
According to officials, the taxpayer claimed Rs 68.7 lakh as the indexed “cost of improvement” between 2002–03 and 2007–08, along with an indexed acquisition cost of Rs 73 lakh. As a result, he reported a long-term capital gain (LTCG) of just Rs 24,774 in his income tax return.

However, a forensic analysis triggered by suspicions over one expense bill dated July 6, 2002 — allegedly for Rs 7.68 lakh — led to the unravelling of the fraud. Advanced AI tools detected that the bill was written in ‘Calibri (body)’ font, which raised immediate red flags. Investigators pointed out that although the font was designed between 2002 and 2004, it was only publicly released by Microsoft in 2006 and became the default font for Office in 2007.

If you’ve been waiting to file your income tax return (ITR) under Form ITR-2, here’s some good news. The Income Tax Department has finally activated ITR-2 for online filing with pre-filled data. That means salaried taxpayers, homeowners with multiple properties, and people with capital gains can now file their returns more easily, without downloading Excel files or struggling with manual uploads.

The Income Tax Department shared an update on ‘X’ (formerly Twitter), “Kind Attention Taxpayers! Income Tax Return Form of ITR-2 is now enabled for filing through online mode with pre-filled data at the e-filing portal.”

What has changed?
Until now, only ITR-1 and ITR-4 were available for online filing. ITR-2 and ITR-3 Excel utilities, however, were released last week after almost 100 days of delay. People eligible for ITR-2 now will have option to file return online with pre-filled data also along with an option to download Excel utility and upload it after filling out.

On July 18, 2025 the Income Tax Department enabled online filing of ITR-2 form. This means that all taxpayers including salaried individuals who have taxable capital gains, crypto income, and more can begin filing their income tax returns (ITRs) online via the e-filing ITR portal starting today.

The extended ITR filing deadline for FY 2024-25 (AY 2025-26) is September 15, 2025. Previously only ITR-1 and ITR-4 were released (both online and excel utility) which enabled a limited set of taxpayers with specified income classifications to file their ITR. However for ITR-3 form, only the excel utility is enabled, the online utility is yet to be enabled.

The Income Tax Department said on X (formerly Twitter): “Kind Attention Taxpayers!Income Tax Return Form of ITR-2 is now enabled for filing through online mode with pre-filled data at the e-filing portal.

On June 27, 2025, an Indian engineer , who had been working in Dubai, United Arab Emirates since 1997 won a case of Rs 69-lakh unexplained investment under Income Tax Act, 1961 on technical grounds. The engineer had bought a property in his hometown in Kerala for Rs 39 lakh and also put Rs 30 lakh in fixed deposits (FDs). However, the income tax department claimed that both the property purchase (Rs 39 lakh) and FD investment (Rs 30 lakh) were ‘unexplained investments’ under Section 69 of the Income Tax Act, 1961.

As a result, the entire Rs 69 lakh (39+30) was added to his income and accordingly he was issued tax notices and penalty proceedings were also initiated against him. To fight against this tax notice and penalty proceedings, this engineer at first filed an appeal in the Dispute Resolution Panel (DRP) of the tax department. He explained that since the time he was working in Dubai, he had been sending remittance money back to his family in India. He also explained that this Rs 30 lakh in FDs were simply old FDs that had matured and were reinvested.

He also explained that the funds for the property investment came entirely from his salary in Dubai, meaning the income had never accrued or arisen in India. The DRP accepted the explanation for the FD money but rejected the property investment explanation so he filed an appeal in ITAT Mumbai.

The Parliament's Select Committee examining the Income Tax Bill, 2025 on Wednesday is learnt to have cleared the proposed legislation without any substantial change, including the contentious provision allowing officers access to communication channels (like WhatsApp) of tax payers facing search or seizure, paving the way for its introduction in the Monsoon Session.

Sources said the Select Committee headed by senior BJP MP Baijayant Panda met here and unanimously adopted the report on the Bill, which was tabled in Lok Sabha on February 13. The panel is expected to table its report on Monday, the first day of the Monsoon Session, and the government is likely to go ahead passing it during the Session that is scheduled to end on August 21.
The government aims to implement the new Income Tax law, which it says would simplify language, eliminate redundancy, and streamline procedures and processes to enhance the taxpayer experience, from April 1, 2026 by replacing the Income Tax Act, 1961. The 1961 Act has been amended 65 times and around 4,000 amendments have been made to its provisions.

For non-resident Indians (NRIs) who have spent years abroad, homecoming isn’t just a change of address, it’s a full-circle moment. There’s a mix of excitement, nostalgia, hope, and even a bit of nervous anticipation. One isn’t just relocating, but rediscovering. Your relatives may welcome you with open arms, but the Income Tax Department greets you with Form 26AS and a fresh set of tax rules. If you’re planning to settle in India, understanding how your tax residency status changes—and what that means for your income—is as important as getting your shipping container through customs.

Decoding tax residency
Contrary to the notion that NRIs’ entire global income becomes taxable the moment they return to India, the tax liability here in fact is determined primarily by the number of days they’ve been physically present in the country during the concerned financial year.

India’s tax laws classify individuals into three categories: NRI, Resident but Not Ordinarily Resident (RNOR), and Resident and Ordinarily Resident (ROR).

Take the example of Aryan. After a 12-year stint in the US, he permanently returns to India at the start of July. As he’ll spend over 182 days here in the year 2025-26, he’ll be classified as a resident for the fiscal. But it doesn’t mean all his overseas income—like interest on his US savings or rent from a property in New York—becomes taxable here right away.

The Excel utilities of all income tax return (ITR) forms are now out, including ITR-2 and ITR-3. ITR-2 is for folks with salaries, capital gains, crypto earnings, and so on, while ITR-3 is mainly for businesses that need to undergo tax audits, as well as individuals trading in futures and options (F&O). In short, ITR-3 is for those looking to declare their income under the category of Profits and Gains from Business and Profession (PGBP).

But just like with other Excel utilities of ITR-1, ITR-2, etc, the ITR-3 Excel utility for Assessment Year (AY) 2025-26 too has some significant updates vis-a-vis last year’s version.

What are the new changes to ITR-3 tax form?
SR Patnaik, Partner (head - taxation), Cyril Amarchand Mangaldas, highlights the important changes introduced in ITR-3 Form for AY 2025-26:

The Income Tax Department has initiated a major action against individuals who obtained tax refunds through false tax deductions and exemptions across the country. The department conducted search operations at over 150 locations as part of a verification exercise, aimed at dismantling the networks behind fraudulent tax evasion activities and ensuring accountability under the law.

Over the last 4 months, about 40,000 taxpayers themselves withdrew wrong claims of Rs 1,045 crore, the Finance Ministry said in a release issued on Monday.

“Over the past year, the IT Department has carried out extensive outreach efforts, including SMS and email advisories, nudging suspected taxpayers to revise their returns and pay the correct tax. Physical outreach programs, both on and off campus, have also been conducted. As a result, approximately 40,000 taxpayers have updated their returns in the last four months, voluntarily withdrawing false claims amounting to Rs 1,045 crore,” the ministry said.

The Income Tax Department initiated a large-scale verification operation across multiple locations in the country on 14th July 2025, targeting individuals and entities facilitating fraudulent claims of deductions and exemptions in Income Tax Returns (ITRs), the Finance Ministry said in a release on Monday.

This action follows a detailed analysis of the misuse of tax benefits under the Income-tax Act, 1961, often in collusion with professional intermediaries.

Investigations have uncovered organised rackets operated by certain ITR preparers and intermediaries, who have been filing returns claiming fictitious deductions and exemptions, the release said. These fraudulent filings involve the abuse of beneficial provisions, with some even submitting false TDS returns to claim excessive refunds, it added.

Tax dept uses data analytics, advanced tools to track fraudulent claims
To identify such irregularities, the tax department has leveraged technology tools, including data analytics, third-party sources, conduct intelligence, and advanced artificial intelligence tools, the ministry said.

The income tax department has released the Excel based utilities of most of the income tax return (ITR) forms like ITR-1, ITR-2, ITR-3, and others. However, this year (AY 2025-26), there are six significant changes in the reporting requirements for ITR-2. This form is applicable to those taxpayers who earn a salary or have non-business or professional income, as well as those with crypto, capital gains, and other types of income.


Keep reading to learn more about the six changes in the reporting process for the ITR-2 form.

What are the changes in the reporting process for ITR-2?
The Excel-based income tax return (ITR) utilities for ITR-2 and ITR-3 were released on July 11, 2025. Here, we have listed the changes in the reporting process for ITR-2 Excel utility. The online utility (e-filing ITR portal) is yet to be notified.

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.