In order to simplify the tax processing and reduce errors, the government has notified amendments to the Section 143(1) under the Finance Bill 2025. The revised rules aim to check inconsistencies between the current year’s income tax return (ITR) and the preceding year’s ITR at the time of processing. For taxpayers, these changes can potentially reduce the likelihood of tax notices being issued later.
Before divulging more about the amendment, let’s understand what is Section 143(1).
Section 143(1) of the Income Tax Act, 1961 allows the tax department to process ITRs by making basic corrections such as:
Arithmetic errors
Incorrect claims that are apparent from the return
Discrepancies in tax credits and deductions
The recent amendments have expanded the scope of these checks to include inconsistencies between the current ITR and any previous ITRs. This amendment could influence taxpayers’ income calculations, however, the change has also left some questions unanswered.
What would this amendment mean for taxpayers?
As per the supplementary FAQ released by the Income Tax Department, this change will allow tax authorities to compare specific financial details across different assessment years (AY).
However, the authorities have yet to reveal what these inconsistencies are exactly that will be checked by them.
“These inconsistencies are yet to be prescribed. However, an example could be where the taxpayer has made a claim of any credit in a previous return but the corresponding figures are not the same in the current return,” the ITD noted in FAQs.
Tax experts believe that this change has been put in place to ensure tax compliance without subjecting taxpayers to unnecessary scrutiny or notices.
Naveen Wadhwa, Vice President-Research at Taxmann.com told the Economic Times that these could cover various financial data points, such as:
Income reported in previous years versus the current year
Assets disclosed in previous returns (such as in Schedules FA or AL)
Carried forward losses or deductions
Audit report details for businesses
He further stated that adjustments under Section 143(1)(a) are made to determine the total income or loss, meaning that only discrepancies which directly impact the computation of income or loss would be treated as ‘inconsistencies’ for adjustments as per the new subclause.
This amendment has sprouted a few questions that explore whether the change would also lead to complications. Some key gaps that the department should still address include:
Will the tax department issue a notice before making adjustments?
Will taxpayers have sufficient time to rectify these errors before any final assessment
What specific inconsistencies will be checked and how would they impact the tax computation?
