Income Tax Department Intensifies Scrutiny on Senior Executives Over Income Discrepancies
The Income Tax Department has launched a significant enforcement drive targeting senior executives at multinational corporations and startups for alleged misreporting of income. Notices have been dispatched to numerous individuals earning above Rs 50 lakh, accusing them of underreporting earnings, claiming false exemptions, or misrepresenting financial details to reduce tax liabilities.
Key Areas of Investigation and Alleged Violations
Authorities have identified several critical areas where discrepancies are prevalent. These include non-disclosure of overseas assets and foreign income, understatement of stock-based compensation, and inflated claims for benefits such as accommodation and travel allowances. According to officials cited in reports, the department has specifically flagged cases involving chief executives and managing directors, urging them to correct filing errors proactively to avoid further action.
The scrutiny extends across various industries, with executives from sectors like information technology, fast-moving consumer goods, hospitality, engineering and construction, and automobiles receiving notices. Additionally, founders and senior leaders from startups have come under the tax department's radar, highlighting a broad-based approach to enforcement.
Uncovering Irregularities Through Advanced Data Analytics
These issues emerged during a detailed review of income tax returns filed by high earners in the current assessment period. Leveraging the 'Non-intrusive Usage of Data to Guide and Enable (Nudge)' initiative, the department has prompted many executives to submit revised returns to address inconsistencies. An official noted that some taxpayers mistakenly believed overseas acquisitions and holdings would remain undetected. However, with automated data-sharing agreements and Permanent Account Number (PAN)-linked monitoring, concealing foreign dealings has become increasingly difficult.
Among the undeclared assets uncovered are properties registered under spouses and minor children, foreign equity investments, cryptocurrency-based income, and funds in overseas bank accounts. The investigation also revealed a concerning pattern where multiple taxpayers represented by the same chartered accountants were contributing to identical institutions, leading to separate proceedings against those professionals.
Broader Compliance Efforts and Recent Developments
This crackdown is part of the government's wider strategy to enhance tax compliance through data-centric oversight. In recent years, authorities have increasingly relied on artificial intelligence-powered analytics to detect mismatches between reported income, tax deducted at source records, and third-party financial information. So far in the current financial year, over 2.1 million taxpayers have revised their returns for assessment years 2021-22 through 2024-25, resulting in additional tax payments exceeding Rs 2,500 crore. Moreover, more than 1.5 million returns have been updated for the ongoing assessment year.
In a related move, the 2026-27 Budget introduced a one-time six-month compliance window allowing individuals to disclose foreign assets. This measure aims to provide relief to taxpayers, including professionals with unreported employee stock option holdings and students maintaining funds in overseas accounts, encouraging voluntary compliance and reducing future penalties.
