Income Tax Department Now Plans to Cross-Verify Your Claims Under the Old Tax Regime

The Income Tax Department is increasing its scrutiny of deductions and exemptions claimed under the old tax regime. With more taxpayers choosing between the old and new systems, authorities are implementing stricter verification methods to ensure compliance and reduce tax evasion.

This move signals a significant shift for salaried professionals, business owners, and freelancers who rely heavily on deductions such as HRA, LTA, Section 80C, 80D, and interest on housing loans. If you are still opting for the old tax regime, it is important to understand how this cross-verification could impact your filings.

 

Why Cross-Verification?

The government has noticed discrepancies between income reported by taxpayers and the actual deductions claimed. Some individuals claim higher exemptions without supporting documents. To minimize revenue leakage, the Income Tax Department is likely to:

• Match reported income with employer Form 16.

• Cross-check housing loan interest with bank/NBFC data.

• Verify insurance premium deductions with insurers.

• Compare rent receipts with landlord PAN and property records.

• Review medical insurance and health check-up claims.

This verification process will be automated using data analytics and AI-based matching.

 

What Taxpayers Should Do

If you plan to continue with the old tax regime, ensure you have proper documentation for every deduction claimed:

1. HRA (House Rent Allowance):

   • Keep rent receipts and rental agreements.

   • If rent exceeds ₹50,000 per month, landlord PAN is mandatory.

2. Section 80C Investments:

   • Maintain proof of LIC, PPF, ELSS, or tuition fee receipts.

3. Home Loan Interest (Section 24):

   • Collect annual interest certificates from your bank or housing finance company.

4. Medical Insurance (Section 80D):

   • Save premium receipts and medical check-up invoices.

5. Education Loan Interest (Section 80E):

   • Preserve bank certificates for interest paid.

6. Donations (Section 80G):

   • Ensure donation receipts have the organization’s PAN and registration number.

 

Key Risks if Not Compliant

Failing to maintain proper evidence may lead to:

• Disallowance of deductions → Higher tax liability.

• Penalty notices for misreporting or underreporting.

• Scrutiny assessment where detailed questioning is done.

• Loss of refund eligibility in some cases.

 

Old Regime vs. New Regime

• The old regime allows multiple exemptions and deductions but requires paperwork and compliance.

• The new regime offers lower tax rates with no major exemptions.

For many salaried individuals without large investments or home loans, the new regime is simpler. However, those with significant deductions (housing loans, insurance, tuition fees) may still benefit from the old regime — provided they comply with verification.

 

Compliance Tips

• File your ITR accurately and honestly.

• Avoid inflated claims without proof.

• Keep soft copies of receipts for at least 6 years.

• Review Form 26AS and AIS (Annual Information Statement) before filing.

• Consult a tax professional if deductions are complex.

 

Conclusion

The Income Tax Department’s plan to cross-verify claims under the old tax regime is a clear indication that transparency and accountability are becoming non-negotiable. Taxpayers must be proactive in maintaining proper documentation and ensuring accuracy in filings.

Choosing between the old and new regimes should not just be about saving tax today, but also about staying compliant in the long run.