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Dec 22, 2025
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Income Tax Dept's algorithm is misreading capital gains from unlisted shares as business receipts and sending intimations; Know what to do
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.
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