ITR Filing FY2025: Under-reporting High-value Transactions? Here’s What It Could Cost You!

The Income Tax Department has ramped up penalties for taxpayers who fail to accurately report high-value financial transactions. To detect such discrepancies, the Income Tax Department relies on the Specified Financial Statement (SFT) system, which gathers transaction data from banks, mutual funds, and other financial entities to ensure transparency and compliance.

Types of High-Value Transactions Reported in SFT

ITR Filing 2025: Risks of Misreporting Your Income

Failure to report these transactions or discrepancies between your ITR and AIS can prompt the Income Tax Department to issue notices seeking explanations. Unsatisfactory replies can lead to scrutiny and further investigation.

What is the Penalty for Misreporting Income During ITR Filing 2025?

Under Section 270A of the Income Tax Act, penalties depend on whether the under-reporting is unintentional or deliberate.

• Under-Reporting (Genuine Mistake): If the discrepancy arises from an honest error, the penalty is 50% of the tax payable on the under-reported income.
• Misreporting (Deliberate Concealment): If the under-reporting is intentional (such as hiding income or falsifying facts), the penalty can be as high as 200% of the tax payable on the misreported amount.

Examples to Understand Penalties on Misreported Income Better

For example, if the tax due on undisclosed income is ₹1 lakh, a genuine mistake would attract a ₹50,000 penalty, while deliberate misreporting could lead to a ₹2 lakh penalty.

In more serious cases of willful tax evasion involving amounts exceeding ₹25 lakh, the law prescribes rigorous imprisonment from 6 months to 7 years, along with fines. Lesser cases may lead to imprisonment from three months to two years, plus penalties.

Read more: Income Tax High-Value Transactions: Mandatory Reporting Limits Financial Entities Must Report Under SFT.

Conclusion

The SFT and AIS mechanisms have significantly strengthened tax compliance by enabling the government to detect undeclared income and suspicious transactions. Taxpayers should regularly check their AIS and ensure that all high-value transactions are properly reported in their ITR to avoid penalties and legal complications. Staying transparent and proactive is the key to a smooth tax filing process.

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