Income Tax: Your ITR This Year Will Be Compared With Last Year; Know How You Can Avoid Trouble
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The government has amended Section 143 of the Income Tax Act to allow comparison of a taxpayer's current ITR with their previous year's return.
As the income tax filing 2025 is expected to be rolled out soon, there is a new rule this year that every income tax return (ITR) filer must know. According to the Finance Act 2025, your this year's ITR will be compared with the ITR you filed last year. This change is aimed at tightening tax compliance, reducing under-reporting, and enabling better scrutiny of income and deduction patterns.
'In a move aimed at tightening tax compliance, the government has amended Section 143 of the Income Tax Act to allow comparison of a taxpayer's current ITR with their previous year's return. This change enables the income tax department to flag discrepancies or sudden changes in income, deductions, or tax liability at the preliminary processing stage itself," said Rajarshi Dasgupta, executive director (tax) of AQUILAW.
Section 143 of the Income Tax Act provides for a summary assessment of the ITR filed wherein the primary aspect of verification pertains to arithmetical accuracies and consistencies in the information shared within the return itself.
'After summary assessment, the ITR could be subject to detailed scrutiny. Earlier, such comparisons were typically reserved for detailed scrutiny cases. With this amendment, the department can now assess inconsistencies right at the time of routine return processing under Section 143(1)," Dasgupta added.
He added that such verification at the early stages will definitely boost the correctness of returns filed wherein the information furnished in returns having a bearing or reference from a previous year's return will be checked expeditiously. This shall help the department as well as the taxpayers wherein notices can be avoided with penal implications in case bonafide errors are corrected on the basis of such comparison.
1. Ensure income from all heads is accurately reported and supported by documents such as Form 16, bank statements, rent agreements, or capital gain statements.
2. If you're claiming new deductions or a higher deduction amount, ensure that it's well-documented and legitimate. A sudden spike in deductions could invite further inquiry.
3. Reconcile your TDS details before filing the return to avoid discrepancies.
4. If high-value transactions such as cash deposits, mutual fund purchases, and property deals are absent in your previous ITR but present this year, ensure that they are disclosed and justified, especially if they contribute to a significant increase in income or asset holdings.
5. If you have capital or business losses from the previous year and wish to carry them forward, ensure that they were properly reported in last year's ITR.
6. Any inconsistency — like claiming deductions under the old regime after opting for the new one — can lead to the return being marked defective.
8. If your income has drastically dropped or risen — due to job loss, career switch, inheritance, or any other reason — attach relevant disclosures or explanations in the ITR form or in response to queries raised post-filing.
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