New I-T Rules 2025: Your Return Will Be Investigated In These 5 Cases

Tax filing season is here. And nobody wants to receive a tax notice or be investigated by the tax department. Here, we take a look at five main reasons why your tax return may be investigated. You must pay attention to these to avoid being under the scrutiny of the tax department. You must report your income properly and keep all documentary proof.

The Income Tax Department of India has been working diligently to strengthen the tax compliance framework with the extensive use of AI and data analytics to identify gaps and discrepancies in disclosures and actual information, which triggers a mandatory investigation,” says Deepak Kumar Jain, founder and CEO of TaxManager.in, the tax advisory and e-filing portal platform.

Five major trigger points which can lead to investigation are:-

1. High-value transactions not matching the declared income

2. Large cash deposits or withdrawals exceeding the prescribed limit of Rs 10 lakh in a savings account and Rs 50 lakh in a current account annually

3. Non-disclosures of Foreign Assets or Income

4. Misreporting of Business Income

5. Claiming of Excessive Deductions leading to Refunds

These triggers typically lead to automated or manual scrutiny notices, such as under Section 143(2) or 148 of the Income Tax Act.

How These May Affect Different Categories Of Taxpayers 

Salaried Individuals: “The impact on them may be limited unless they have any significant or material financial transaction, which is not commensurate to their salary, such as significant capital gains, large property transactions, or the dept receives any substantive evidence from any law enforcement agencies for any tax evasion,” says Ritika Nayyar, partner, Singhania & Co.

Freelancers: Could potentially have some impact where freelancers have higher income or high-value clients, which could have triggered assessments in earlier years, leading to significant additions which were either accepted, confirmed, not appealed against, etc., or the dept receives any information law enforcement agencies provide regarding potential tax evasion.

Small Business Owners: This could impact deeper for this section as small business owners are more prone to scrutiny/ raids/ investigations, and with such things, these guidelines will immediately get applied. “ Further, if in previous assessments there have been substantial additions, which were either accepted or not appealed against, their ITRs would result in mandatory scrutiny. Further, these businesses could also be subjected to such guidelines if tax evasion information is provided by law enforcement agencies,” says Nayyar.

What Taxpayers Should Do To Avoid Scrutiny By The Income Tax Department 

Salaried individuals, freelancers, or small business owners need to ensure they do proper reporting of their income, which should match 26AS and AIS, alongside declaring high-value transactions or purchases that match the reported income.

“While maintaining all documentary proofs for the claims made, it will make it much easier to prove the reported deductions are in line with tax rules.

Above all, ensure the right ITR form is chosen and the return is filed on time and e-verified within the specified time,” says Kumar.