ITR filed and verified? Here’s how the Income Tax Department spots mismatches—and when it sends a notice

The 31 July income tax return (ITR) filing deadline is fast approaching, but filing the return alone does not complete the process. An ITR becomes valid only after e-verification, which triggers its processing by the Income Tax Department. Once e-verified, taxpayers can monitor the status of their return on the e-filing portal. Although simple returns are generally processed within 45 days, every ITR undergoes multiple validation and risk checks before it is either accepted, adjusted or flagged for further scrutiny. Here’s a look at how the ITR processing mechanism works:

Basic checks

The Centralized Processing Centre (CPC) in Bangalore first verifies that you’ve used the correct ITR form, filled in all mandatory schedules, and that there are no calculation errors. If it finds major issues, you may receive a defective return notice.

“After e-verification, the return is formally admitted into the system for processing. The department then conducts internal validations, checks whether the return is complete, and compares the figures with linked records, such as TDS, tax payments, and reported income. If everything matches, the return moves toward processing; if not, it may trigger an intimation or defect notice,” CA Chandni Anandan, Tax Expert at ClearTax, told Livemint.

Data validation

Next, the department compares the income, TDS, and deductions you’ve reported with the information available in Form 26AS, AIS, and TIS. Any mismatch may require further review.

“The most important sources are AIS, Form 26AS, and TIS, along with the taxpayer’s own books, salary details, bank statements, and TDS/TCS records. AIS captures a wide range of reported financial transactions, while Form 26AS focuses heavily on tax credits and deductions. Reconciliation helps ensure that income, credits, and tax paid all align before or during processing,” CA Anandan explained.

Processing and intimation

Once these checks are complete, the return is processed and an Intimation under Section 143(1) is issued. This document shows the tax calculated by the department, compares it with your return, and confirms whether you’re due a refund, need to pay additional tax, or have no demand/no refund.

Refund credit

If you’re eligible for a refund, it is usually initiated a few days after your return shows as Processed. The amount is then credited to your pre-validated bank account, typically within a few working days.

Does filing early help?

Not necessarily. However, as per experts, returns filed earlier are generally processed sooner because the CPC may process returns in the order they are received.

Do small mismatches matter?

Speaking about the myths associated with tax scrutiny, CA Anandan opined: A common myth is that only high-income taxpayers are ever checked. Another is that if a return is prefilled, it must be correct automatically. Many also believe that small mismatches do not matter, or that verification only happens when a refund is large. In reality, data matching can flag ordinary returns too, especially when reported income or tax credits do not align.

Revised returns and large refunds

A revised return or a large refund may draw more attention if the numbers change materially or if there is a mismatch, but neither action by itself guarantees scrutiny, CA Anandan believes. The key factor is whether the figures are consistent with AIS, Form 26AS, and the taxpayer’s own records. If they are, the return is still more likely to process smoothly.