New ITR Rule From April 2025: How Mismatched Tax Returns Could Impact You

The Income Tax Department is set to introduce a change in tax return processing from April 2025. The update aims to improve accuracy and minimise discrepancies in filings. An amendment to Section 143(1) of the Income Tax Act will enable tax authorities to compare a taxpayer’s latest Income Tax Return (ITR) with those from previous years.

With this revision, any inconsistency between the current and past returns will be flagged, potentially leading to automatic adjustments.

While this change is meant to streamline assessments and reduce the number of tax notices, it could also have far-reaching consequences for taxpayers.

Section 143(1) of the Income Tax Act governs the initial processing of income tax returns (ITR) by the tax department. It allows for automatic adjustments to correct errors, such as miscalculations or apparent discrepancies in claims made in the return.

Once an ITR is filed, the Income Tax Department reviews it under this section. If any errors, discrepancies, or refund/interest adjustments are found, the taxpayer receives an intimation detailing the necessary corrections or adjustments.

In the Finance Bill 2025, Finance Minister Nirmala Sitharaman proposed to amend Section 143(1) of the Income Tax Act, allowing the I-T Department to compare the current year's tax return with those from previous years. This aims to identify inconsistencies in reported income, deductions or other financial details.

As per the Central Board of Direct Taxes (CBDT), “Section 143(1) has been amended to provide for checking any inconsistency in the return with respect to the information in the return of any preceding previous year, as may be prescribed.”

The amendment to Section 143(1) could have a major impact on taxpayers, as it expands the scope for adjustments during tax return processing. The Income Tax Department will now scrutinise inconsistencies between the current and previous ITRs, particularly in areas such as reported income, declared assets and carry-forward losses.

While taxpayers will still have the opportunity to respond to any proposed adjustments, this change may lead to an increase in tax disputes. Although the goal is to streamline assessments and reduce unnecessary notices, the broader scope of scrutiny could result in more cases being flagged for discrepancies.

The Income Tax Department is expected to clarify what specific inconsistencies will be checked in the coming days.