Salaried taxpayers across India are receiving automated income-tax notices more frequently in 2025. The Income Tax Department’s upgraded data-matching algorithms are now stricter and leave little room for even minor errors.
Many employees are unaware that perquisites, reimbursements, ESOP-related income or missing TDS entries can create discrepancies in their tax return. As a result, even genuine taxpayers are seeing more notices.
The most common triggers for automated notices under Section 143(1)(a) fall into a few key categories. One major reason is mismatch in interest income from savings accounts or fixed deposits as shown in the Annual Information Statement (AIS) or Form 26AS. Dividend income that is not disclosed correctly also raises flags.
Another major area is ESOP and RSU taxation. Perquisites from these stock options are taxed under specific rules, and any difference in how employers report them can lead to automated adjustments.
Freelance income or platform-based earnings also create issues. These are reported by companies under the Statement of Financial Transactions (SFT), and if not included in the income-tax return, the system immediately detects an under-reporting.
Capital gains mismatches are another big reason. The AIS may show share sale values, but if the taxpayer reports incorrect purchase cost or ignores the transaction entirely, a notice gets generated. High-value cash deposits, heavy credit card spending and overseas remittances can also be flagged and treated as unexplained credits.
The rise in automated notices is linked to stronger machine-learning tools now used by the Central Processing Centre (CPC). These algorithms match data from Form 16, Form 26AS, SFT filings, remittance records and several financial institutions in real time. Banks, NBFCs, brokers, credit card networks, EPFO and even foreign authorities share data linked to each PAN. Any difference between the tax return and AIS leads to immediate alerts.
To avoid future notices, taxpayers must carry out a few key checks before the updated return deadline in March 2026. These include reconciling TDS with Form 26AS and AIS, and uploading required rent documents for claiming HRA.
Capital gains should be matched with broker statements, while all foreign income and assets must be disclosed correctly. ESOP valuations, TDS entries and high-value transactions in the AIS should also be verified carefully.
Read more: Brightcom Group Share Price in Focus As it Eyes Bigger Slice of Global Ad Market.
Automated tax notices are rising because the system now detects even the smallest mismatch instantly. By reviewing income details, reconciling AIS entries and ensuring proper reporting, salaried taxpayers can avoid unnecessary demands and stay compliant with ease.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Published on: Nov 20, 2025, 1:16 PM IST
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