June 27, 2025: Over 60 lakh Income Tax Returns (ITRs) have already been filed for the financial year 2024-25 (assessment year 2025-26), according to data released by the Income Tax Department. Nearly 1 lakh of these returns have been processed. Meanwhile, the government has ramped up its scrutiny measures this year using advanced data analytics and artificial intelligence (AI) to crack down on tax evasion.
Tax experts say authorities are closely tracking mismatches between declared income and actual lifestyle or spending habits. Individuals showing low income but spending heavily on foreign travel, luxury items, or property are being flagged.
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Key Red Flags for ITR Scrutiny in FY25
The new scrutiny framework introduced by the Income Tax Department includes compulsory investigations under several categories:
- CS01 – Tax Survey Cases:
Returns will be scrutinized if a survey under Section 133A has been conducted on the taxpayer. - CS02 & CS03 – Search and Seizure:
All returns of individuals raided or whose documents were seized between April 1, 2023, and March 31, 2025, will be specially monitored. - CS05 – Repeated Cases of Undeclared Income:
If a taxpayer has previously hidden income above ₹50 lakh in metro cities or ₹20 lakh in non-metro regions, their return will automatically go into scrutiny. - CS06 – Inputs from CBI, ED or Other Agencies:
Returns will be flagged if adverse reports or intelligence are shared by agencies like CBI or ED.
What’s Being Monitored Closely?
With real-time data analysis tools, the government is now tracking high-value transactions and comparing them with ITR declarations:
- Credit card spends above ₹10 lakh/year
- Property deals worth over ₹30 lakh
- Cash deposits exceeding ₹2 lakh
Even middle-income individuals are under the scanner if their spending patterns appear disproportionate to their declared income.
The New Normal: AI-Driven Tax Surveillance
Unlike earlier, when scrutiny mostly targeted big businessmen and corporates, the new regime also focuses on salaried individuals and common taxpayers. Authorities are integrating bank transactions, mutual fund investments, real estate purchases, gold buys, and foreign travel expenses with reported income to detect discrepancies.
Tax consultants warn: “Mismatch cases” will be probed first. If your lifestyle doesn’t match your ITR, expect a notice.”
Conclusion: Transparency Is Key
With AI-powered scrutiny and seamless data integration, experts advise taxpayers to fully disclose all sources of income and maintain accurate records of investments and expenses.
Pro Tip: If you’ve had a high-spend year—on travel, property, or luxury purchases—ensure your ITR reflects it accurately to avoid triggering scrutiny.