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The Central Board of Direct Taxes (CBDT) has issued a major advisory on 23 December 2025, urging taxpayers to immediately review and correct ineligible deduction / exemption claims flagged through data analytics.

⚠️ What’s Breaking:

AY 2025–26 cases identified for wrong or ineligible deductions

Bogus political donations & incorrect PAN details under scanner

Taxpayers receiving SMS / Email under NUDGE campaign

Deadline: 31 December 2025 to file Revised ITR without further action

Post 31 Dec → Updated Return with additional tax cost

✅ No action needed if claims are genuine and lawfully made.

📌 A clear signal:
The tax department is moving with data-backed, trust-first enforcement — but timelines are strict.

Neha's ITR income is just 6.5 Lakh. Her Credit card transactions were 10 lakh plus. She received Income Tax Notice.

Neha is a 29-year-old marketing executive in Mumbai.
Every time she got a notification like “Spend ₹1L this month and get 2,000 reward points,” she jumped in.

She would,
Swipe. Pay. Earn. Repeat.

Neha would spend ₹12–₹13 lakhs a year on her credit cards,
but always cleared dues on time.
Zero debt. Smart play.

Neha’s declared income in her ITR was ₹6.5 lakh.
Her credit card spends were ₹12.5 lakh.

On paper, she was spending double of what she was earning.
That’s a major mismatch. And the Income Tax system, powered by AI-backed algorithms, is designed to pick up these gaps instantly.

She now had to explain:
? Where the extra money came from
? Why she was spending more than she was earning
? How her actual lifestyle aligned with her declared income

There is no explicit rule in the Income Tax Act.
But here’s what experts and CAs widely agree on....
🟧 If your annual credit card spending exceeds ₹10 lakh, your account gets flagged under SFT (Specified Financial Transactions).

Once flagged....
🔹 Your spending is matched with your ITR
🔹 The system checks for large gaps
🔹 You may receive a notice or enquiry, asking for documentation

Even if you’re not doing anything wrong, lack of documentation or misreporting could lead to:
🔹 Penalties
🔹 Late tax payments
🔹 Scrutiny under “Income from Other Sources”

𝗡𝗲𝗵𝗮’𝘀 𝗮𝗰𝘁𝘂𝗮𝗹 𝗰𝗮𝘀𝗲
Turns out, Neha was doing two things right, but one thing wrong....
✅ A lot of her expenses were for official work reimbursed by her company.
✅ Some expenses were for family members, paid on her card but settled later
❌ What she didn’t do was declare this or maintain clear tracking in her financial records.

So, when the notice came, she had to,
+ Submit employer reimbursement statements
+ Show personal transaction splits
+ Explain the source of funds for personal expenses
It took her 3 weeks and a Tax Advisor to help them

Take this post seriously. As an investment Advisor we are all about showing you blindspots and protecting you from these unforeseen challenging in your routine life.

TDS Non-Compliance Penalties You Need to Know!

on top of Tax Deducted at Source (TDS) compliance to avoid costly penalties!

's a quick guide to common TDS errors and their consequences under the Income Tax Act.

1 Short Deduction of TDS

Issue: Deducting less TDS than required (e.g., wrong rate applied). Consequence: Interest at 1% per month (Section 201(1A)) + potential disallowance of 30% of expense (Section 40(a)(ia)). Fix: Verify TDS rates and correct via revised returns.

2 Short Payment of TDS Issue: Depositing less

TDS than deducted. Consequence: Interest at 1.5% per month (Section 201(1A)) on shortfall + scrutiny from tax authorities.

Fix: Reconcile deductions and deposits; pay shortfall promptly.

3 Late Payment of TDS Issue: Missing the deposit deadline (7th of next month; 30th April for March). Consequence: Interest at 1.5% per month (Section 201(1A)) on unpaid amount.

Fix: Use e-Pay Tax portal for timely deposits.

4 Late Filing of TDS Returns 17 Issue: Missing quarterly deadlines (Jul 31, Oct 31, Jan 31, May 31). Consequence: ₹200/day late fee (Section 234E, capped at TDS amount) + ₹10,000-₹1,00,000 penalty if delayed beyond one year (Section 271H).

Fix: File returns on time via the e-filing portal.

5 Wrong PANs in TDS Returns invalid PANs reported in returns. Issue: Incorrect or Consequence: Higher TDS rate (20% for invalid PAN) + ₹10,000-₹1,00,000 penalty (Section 271H) for incorrect details.

Fix: Validate PANs before filing; correct via revised returns.

Stay Compliant: Verify TDS rates, deposit on time, file accurate returns, and check Form 26AS regularly to avoid surprises. Let's keep penalties at bay!

Attention Business Owners & Finance Professionals
GST Alert: Rule 86B – Are You Paying 1% of GST in Cash?

If your business has a monthly taxable turnover exceeding ₹50 lakhs, Rule 86B under GST restricts the full utilization of Input Tax Credit (ITC) to pay your output tax liability.
At least 1% must be paid in cash, even if your credit balance is sufficient!

Why It Matters:
This rule was introduced to curb fake invoicing — but it impacts genuine businesses too, especially from a working capital and cash flow perspective.

However, there are important exemptions:
If key persons in your business have paid Income Tax > ₹1 lakh in each of the last 2 FY.
If you've received GST refunds > ₹1 lakh in the last FY.
If you've already paid 1% of your output tax liability in cash this FY.
If you're a Govt Dept, PSU, or a local authority.

Staying informed means staying ahead!

Key Changes in ITR Forms for AY 2025–26 You Should Know

The Income Tax Department has notified several important updates in ITR Forms for AY 2025–26. Here’s a quick summary of what’s new:

1. Relaxation in ITR-1 and ITR-4 Usage:
• Taxpayers can now use ITR-1 or ITR-4 even if they have Long-Term Capital Gains (LTCG) under Section 112A, provided:
• The LTCG amount does not exceed Rs. 1.25 lakh, and
• There is no capital loss to be carried forward or set off.
• Earlier, any capital gains would make these forms inapplicable.

2. Expanded Disclosures in ITR-4 – New Tax Regime (Section 115BAC):
• If a taxpayer opted out of the new regime in AY 2024–25 via Form 10-IEA, they must disclose it and confirm whether they wish to continue or revise the decision.
• First-time opt-outs in AY 2025–26 must provide acknowledgment details of Form 10-IEA.
• Additional clarification options are available for delayed filings of Form 10-IEA.

3. Common Updates in ITR-1 and ITR-4:
• Deductions under Sections 80C to 80U must now be selected via dropdown with specific clause/sub-section details in the e-filing utility.
• Income reported under Section 89A (foreign retirement accounts) includes enhanced fields and relief tracking.
• Disclosure of all Indian bank accounts held during the previous year is mandatory (except dormant accounts).
• At least one bank account must be selected for refund credit.

4. Higher Thresholds for Presumptive Taxation under ITR-4:
• Section 44AD (business): Turnover limit increased to Rs. 3 crore if digital transactions constitute at least 95% of total receipts.
• Section 44ADA (professionals): Limit increased to Rs. 75 lakh under the same condition.

These changes aim to streamline compliance and better reflect evolving taxpayer profiles.

Planning to Avail Input Tax Credit (ITC) in GSTR-3B?

As per Section 16 of the CGST Act, here are the must-have conditions for claiming ITC:

✅ Basic Eligibility:
1️⃣ Valid tax invoice/debit note
2️⃣ Goods/services received
3️⃣ Supplier has paid GST to Govt (cash or credit)
4️⃣ You’ve filed GSTR-3B
5️⃣ Invoice appears in GSTR-2B / 2A
6️⃣ Payment to supplier made within 180 days of invoice

🚫 Key Restrictions
📅 Time Limit:
Claim ITC before the earlier of:
• 30th Nov of the following FY
• Filing of Annual Return (GSTR-9)

🔄 Business Use Only – No ITC for personal consumption

📌 Blocked Credits – No ITC on:
• Motor vehicles (with exceptions)
• Food & beverages, club memberships (unless resupplied)
• Works contracts (with conditions)
• Personal consumption goods/services

📴 Also Not Allowed on:
• Exempt Supplies
• Nil-Rated Supplies
• Non-GST Supplies

⚖ Supplying Both Taxable & Exempt Items?
👉 Reverse proportionate ITC under Rule 42 & 43
👉 Claim ITC only on taxable supplies

🌐 ITC on Import of Goods
✔ IGST paid at import (not BCD/SWS)
✔ Goods for business use
✔ Valid Bill of Entry, matching GSTR-2B/2A
✔ File GSTR-3B to claim

GST - Goods & Services Tax, India

🚨 Major Tax Changes from April 1, 2025 – Are You Ready? 🚨

The new financial year brings big updates in taxation! From revised income tax slabs to relaxed TDS norms, here’s what you need to know:

✅ 1. Higher Tax-Free Income
💰 Income up to ₹12 lakh is now completely tax-free under the new tax regime!
➕ Standard deduction of ₹75,000 raises the effective tax-free limit to ₹12.75 lakh.

✅ 2. Increased Section 87A Rebate
💡 More savings! Individuals earning up to ₹12 lakh can pay zero tax with the enhanced rebate.

✅ 3. TDS & TCS Relaxation
📌 For Senior Citizens: TDS exemption on interest income increased from ₹50,000 to ₹1 lakh.
📌 For Tenants & Landlords: TDS on rent raised from ₹2.4 lakh to ₹6 lakh annually for easier compliance.

✅ 4. Big Relief for Businesses & Professionals
📌 Omission of Sections 206AB & 206CCA to reduce TDS/TCS compliance burden for tax deductors & collectors.

🚀 What This Means for You
These changes increase disposable income, reduce tax outgo, and simplify compliance for taxpayers.

📢 Action Plan:
🔹 Check if you should switch to the new tax regime for better savings.
🔹 Recalculate TDS & tax liability based on updated slabs.
🔹 Consult a tax expert for maximum benefits!

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GST Return Alert: Upcoming Blocking of Past Returns – Act Now!

Don't Let Your GST Returns Get Blocked!

Starting October 1, 2023, GST returns due post-this date will no longer be accepted unless past filings are fully reconciled. The three-year restriction came into effect on October 1, 2023, though the GST portal is set to reflect this change in early 2025. Full blocking will be enforced by January 2025.

What’s Affected?
-This amendment affects Section 37 (Outward Supplies), Section 39 (Payment of Liability), Section 44 (Annual Return), and Section 52 (Tax Collected at Source) of the CGST Act.
-Returns under these sections include GSTR-1, GSTR-3B, GSTR-4, GSTR-5, GSTR-5A, GSTR-6, GSTR-7, GSTR-8, and GSTR-9.

Why Reconcile?
Taxpayers need to align GSTR-3B, GSTR-1, and accounting records to ensure full compliance. This helps in reflecting accurate tax liability and input credits.

Key Date: December 31, 2024
File any pending returns from July 2017 to November 2021 by this date to avoid penalties or non-compliance. Even "saved" but not filed submissions are included.

Important GST Update: New Invoice Rules & RCM Regulations Coming Nov 1!

Rule 47A: Introduced via notification 20, kicks in November 1, 2024! Here’s what businesses need to know to stay compliant:

Self-Invoicing Deadline:
- Issue self-invoices within 30 days of receiving goods or services.
- Applies to both goods and services (no more separate timelines).

Non-Compliance Penalties:
- Failure to follow Rule 47A will result in penalties, in line with existing provisions under Rule 47.

RCM Compliance Requirements:
- If you receive goods or services from unregistered suppliers, you must generate and keep self-invoices for tax purposes (as per Sections 3 & 4 of Section 9).

Documentation & Audits:
- Ensure all self-invoices are properly documented and available for verification by tax authorities.

Impact on GST Returns:
- Report line-item invoicing in GSTR-1 to reflect these changes.

Get Ready:
- Update your accounting and invoicing systems to handle these changes before November 1, 2024.

Act now to avoid penalties – Stay ahead of the game!

If your is below Rs. 7.5 lakhs and TDS is not deducted by employer.

Myth: He thinks that he is requirted to file .

Fact: If income exceeds Rs. 2.5 lakhs, then it is to file ITR.

*Looking for Articles/Trainees*

Name of the Firm: Sethi & Associates
Organisation : Cost Accounting Firm
Location: Lucknow
Position: 3 Cost Trainees
Qualification: CMA Student / Graduate
Salary Range: As per Institute norms
Interested candidates may share their CV at Email ID:- [email protected]