The Central Board of Direct Taxes (CBDT) has issued fresh guidelines for compulsory selection of income-tax returns (ITRs) for scrutiny during the 2025-26 assessment year. The new norms target charitable trusts, research institutions, and individuals/entities with a history of tax liability additions, as well as those subjected to search or survey actions.
According to the guidelines, senior field officers must issue scrutiny notices by June 30 for income-tax returns that meet the compulsory selection criteria. The move is part of the government's broader strategy to curb tax evasion and shore up revenues, especially after announcing Rs 1 trillion in tax relief for the middle class in the Union Budget 2025.
Click here to check the Revised Guidelines
Key Categories Selected for Scrutiny
Charitable & Religious Trusts / Research Institutions
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Entities claiming exemptions under Section 11 of the Income Tax Act without valid registration-as mandated under the revised rules effective April 1, 2021-will face automatic scrutiny.
- Cases where registration has been revoked or not granted by March 31, 2024, but exemptions are claimed in FY 2024-25, will be scrutinized by the Faceless Assessment Centre.
- Exceptions include cases where registration revocation has been overturned in appeal.
Entities Involved in Search/Survey Operations
ITRs of individuals or organizations surveyed or searched after April 1, 2023, will automatically be selected for detailed scrutiny.
Repeat Offenders with Tax Additions
- Taxpayers whose past returns saw repeated additions to income above prescribed thresholds will be subject to mandatory scrutiny:
- Rs 50 lakh and above in eight metro cities.
- Rs 20 lakh and above in non-metro regions.
This is a revision from previous thresholds of Rs 25 lakh (metros) and Rs 10 lakh (non-metros), indicating a focused approach toward high-value non-compliance.
Regulatory and Intelligence Referrals
- Any taxpayer flagged by regulators, law enforcement, or intelligence agencies for suspected evasion will be compulsorily scrutinized.
Expert Insight: Balanced Yet Firm Approach
Tax experts welcomed the updated guidelines, citing their potential to streamline the assessment process while reducing compliance burdens for genuine taxpayers.
"The revised thresholds will significantly reduce the number of automatic scrutiny cases, allowing the department to focus resources on high-risk entities," said a senior tax practitioner." Clear timelines for forwarding selected cases to assessment units will also help bring more predictability to the process."
However, experts also noted that international tax and complex cases handled by the CBDT's Central Charges remain outside the faceless assessment scheme.
Registration & Utilization Still Key for Trusts
Charitable and religious institutions must ensure:
- Valid registration under Section 12AB.
- Utilization of at least 85% of receipts toward charitable/religious purposes.
- Timely filing of ITRs as per Section 139(4C).
CBDT data indicates over 3.14 lakh trusts and associations filed ITRs in FY 2023-24, highlighting the importance of strict oversight in the sector.
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