Top 10 Income Tax Notice Triggers in 2025-2026 (And How to Avoid Them)

By Cashiwali.com – India’s Trusted Tax & Compliance Experts

Getting an Income Tax Notice can be stressful — but in most cases, it is completely avoidable.
As India moves towards stricter and more automated tax systems in 2025, the Income Tax Department uses AI-based data matching, AIS, PAN-Aadhaar tracking, and banking insights to detect inconsistencies instantly.

In this article, we explain the top 10 common reasons people receive notices in 2025 and exactly how you can avoid them.

1. Mismatch Between Income Tax Return & AIS

AIS (Annual Information Statement) tracks:

• All bank deposits

• Credit card spends

• Investments

• Mutual funds

• Salary

• Property purchase/sale

• TDS details

If your ITR does not match AIS data → notice is triggered automatically.

✔ How to Avoid

• Download AIS before filing ITR

• Ensure all amounts match your return

• Correct any wrong entries through AIS feedback

2. High-Value Transactions Without Proper Reporting

The government tracks high-value transactions such as:

• Cash deposits above ₹10 lakh

• Credit card spends above ₹2 lakh

• Mutual fund investments above ₹2 lakh

• Property purchase above ₹30 lakh

• Large withdrawals or deposits

If you cannot justify the source → expect a notice.

✔ How to Avoid

• Maintain proof for all high-value payments

• Use banking channels, avoid unnecessary cash

• Declare additional income properly

3. Not Reporting Income From All Sources

Commonly missed incomes:

• FD interest

• Freelancing income

• Side business income

• Crypto gains

• Rent received

• Commission income

• Foreign income or remittances

Non-reporting leads to immediate scrutiny.

✔ How to Avoid

• Cross-check AIS & Form 26AS

• Report all taxable income

• Keep digital records

4. Claiming Excessive or Fake Deductions

Examples:

• Fake rent receipts

• Fake medical bills

• Exaggerated business expenses

• False 80C/80D investments

AI easily detects fake claims → notice & penalties.

✔ How to Avoid

• Claim only genuine deductions

• Keep receipts, proofs & bills

• Don’t rely on “refund-maximizing shortcuts”

5. Mismatch Between TDS Deducted and TDS Claimed

If your employer, bank, or client shows a different TDS amount than what you claim, the system automatically flags your return.

✔ How to Avoid

• Match TDS in Form 26AS before filing

• Ask employer or bank to revise if wrong

• Never claim TDS that isn’t visible in 26AS

6. Cash Transactions Above Permitted Limits

Cash deposits/withdrawals beyond limits attract ITD attention:

• Cash deposits ≥ ₹10 lakh

• Cash business sales

• Large cash gifts

✔ How to Avoid

• Shift to digital mode

• Keep proofs for any cash received

• Don’t justify business turnover only through cash

7. Property Purchase or Sale Without Proper Reporting

If you buy or sell property:

• PAN is mandatory

• TDS must be deducted (if required)

• Capital gains must be reported

If not handled properly → notice is guaranteed.

✔ How to Avoid

• Deduct/collect TDS as applicable

• Report capital gains

• Keep sale deed, receipts, registry copies

8. Claiming Losses Without Proper Documentation

Examples:

• Business losses

• Capital losses

• Share market losses

If claimed without proof → notice likely.

✔ How to Avoid

• Maintain digital books of accounts

• Keep contract notes & statements

• Claim only legitimate losses

9. Non-Filing of ITR Despite Being Eligible

In 2025, non-filing leads to:

• Automated notices

• Account freeze (in extreme cases)

• Penalties

Even if tax payable is zero, filing may still be mandatory.

✔ How to Avoid

• Check filing threshold

• File even if income is exempt (in some cases)

• Do not skip ITR for loan applications or visa

10. GST–ITR Mismatch for Businesses

If you are a business owner or freelancer:

• GST turnover

• TDS data

• Bank credits

• Profit declared in ITR

All should match.

Mismatch = immediate red flag.

✔ How to Avoid

• Reconcile GST monthly

• Maintain matching turnover in books

• Avoid under-reporting income

Final Word

Income Tax notices in 2025 are mostly automated, not personal.
With correct filing, proper documentation, and early planning, notices can be completely avoided.

Need Professional Help Avoiding Notices?

Cashiwali.com helps with:

• Income Tax Filing

• GST Filing & Reconciliation

• Responding to Notices

• Tax-saving Planning

• Business & Company Registration

👉 Stay safe, compliant, and stress-free — with Cashiwali by your side.