Income Tax Department Sets FY26 Scrutiny Rules, Large Additions And Tax Evasion Cases To Be Examined

Mumbai: The Central Board of Direct Taxes (CBDT) has issued fresh guidelines for compulsory scrutiny of income tax returns filed during FY26. The new framework focuses on high-risk taxpayers while reducing scrutiny for routine compliance issues.

According to the guidelines, notices for detailed scrutiny under Section 143(2) of the Income Tax Act, 1961 can be issued up to June 30 for eligible returns filed during the assessment year.

Exemption Claims Under Scanner

One of the major focus areas is trusts, institutions, NGOs and research organisations claiming tax exemptions despite losing their registrations or approvals.

The scrutiny will cover cases where approvals under provisions such as Sections 12A, 12AB, 35 and 10(23C) were denied, cancelled or withdrawn by March 31, 2025, but the taxpayer still claimed exemption benefits in the return.

However, taxpayers whose registrations were restored through appellate proceedings will not be covered under this category.

Large Additions And Tax Evasion Cases Targeted

The CBDT has also included cases involving large additions made in earlier assessments on recurring legal or factual issues.

Returns may be selected for scrutiny where additions exceed Rs 50 lakh in metro cities including Mumbai, Delhi, Bengaluru, Chennai, Hyderabad, Kolkata, Pune and Ahmedabad. In other locations, the threshold has been fixed at Rs 20 lakh.

Cases supported by verified information indicating possible tax evasion received from law-enforcement agencies, intelligence units or regulators will also face compulsory scrutiny.

Relief For Routine Compliance Cases

The tax department clarified that routine mismatches identified through AIS, SFT, NMS, CPC-TDS or automated analytics will not automatically trigger compulsory scrutiny unless supported by credible evidence of tax evasion.

Tax experts said the move reflects a continued shift towards risk-based assessments and may reduce unnecessary disputes for compliant taxpayers.

Revenue Collection Focus

For FY27, the CBDT has been assigned a direct tax collection target of Rs 26.97 lakh crore. The department has also identified recovery opportunities worth Rs 2.57 lakh crore from tax demands that have already been confirmed by Commissioner of Income Tax (Appeals) authorities.