The Income Tax Department has significantly enhanced its scrutiny capabilities through advanced artificial intelligence and data analytics systems that cross-verify returns against multiple government databases. According to Kinjal Bhuta, Treasurer at BCAS, tax scrutiny today is far less dependent on random selection than it was a few years ago, with the process becoming substantially data-centric. Returns are now cross-verified against AIS, Form 26AS, TDS records, capital gains statements, bank interest reports, GST filings, and data from various government agencies. This technology-driven approach allows authorities to compare information across multiple databases within seconds and automatically screen returns for inconsistencies, unusual patterns, or gaps in reporting. Most scrutiny notices are not accusations of wrongdoing - they often seek clarification or supporting documents for particular transactions or claims, as noted by Siddharth Maurya, Managing Director of Vibhavangal Anukulkara Pvt Ltd.
The Income Tax Department has introduced comprehensive changes to the New Tax Regime for Assessment Year 2026-27, making it considerably more attractive than the Old Tax Regime. The maximum rebate under Section 87A has been increased from ₹25,000 to ₹60,000, potentially providing nil tax liability for eligible assessees with total income within prescribed thresholds. These enhancements are designed to incentivize voluntary adoption of the New Tax Regime among a broader section of the assessee population. The revised slab structure under the New Tax Regime, effective from AY 2026-27, represents a significant restructuring aligned with the government's objective of simplifying direct taxation and nudging assessees toward the default New Tax Regime.
According to The Times of India, taxpayers face different switching restrictions based on their income sources. Individuals without business or professional income can switch between the new and old tax regimes every year, providing greater flexibility in their tax planning. However, taxpayers with business or professional income face stricter rules - their decision to opt for the old tax regime is binding for subsequent years once exercised, with only one withdrawal allowed. An exception exists where individuals cease to have business or professional income. The distinction between taxpayer categories reflects policy considerations, with restrictions on business income holders aiming to ensure continuity and discourage frequent switching for year-specific tax advantages.
As reported by The Times of India, Richa Sawhney, Partner Tax at Grant Thornton Bharat LLP, explains that the distinction between taxpayer categories reflects policy considerations. The restriction on business income holders aims to ensure continuity and discourage frequent switching for year-specific tax advantages. For taxpayers with business income, the choice becomes more strategic and longer-term rather than year-by-year decisions, given that business tax positions often have continuing implications through factors like depreciation and carried-forward losses. The enhanced scrutiny environment makes this strategic approach even more critical, as any disparity between income declared and information available with the tax department can automatically invite scrutiny.
According to The Times of India, taxpayers can only opt for the old income tax regime if they file their tax return within the July 31, 2026 deadline. Any belated tax return will automatically switch them to the old tax regime. Section 115BAC will apply to the forthcoming return of income for FY 2025-26, which will be filed in July/August 2026. The old and new Act provisions related to the new tax regime remain the same, with the new regime being the default option for individual taxpayers. The enhanced scrutiny environment makes accurate filing even more critical, as accuracy is becoming just as important as compliance in the current data-driven tax administration system.
