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The Algorithm vs. The Accountant: India’s Tax Shift (Dec 2025)

Ryan Vaz
Income-tax compliance shift: new 'Tax Year' regime and automated mismatch notices on unlisted share capital gains classification The Income Tax Act, 2025 replaces the Income-tax Act, 1961 and discontinues the 'Assessment Year' framework by adopting a 'Tax Year' regime with effect from 1 April 2026, thereby altering statutory terminology and periodisation for income-tax compliance and administration. Enforcement is increasingly automated, with algorithm-driven 'Mismatch Notices' reportedly recharacterising capital gains from unlisted share transfers as business income due to incorrect TDS coding; taxpayers are directed to rectify the classification through portal-based manual correction, affecting the outcome of automated risk flags and proposed adjustments. Compliance is also shifting from return-based self-declaration to verification of pre-filled information through the AIS, influencing return filing and reconciliation, including belated returns due by 31 December 2025. (AI Summary)

The Indian tax landscape is undergoing a massive overhaul this month. Two major forces are colliding: the simplification of the law and the rise of algorithmic enforcement.

  • Goodbye 'Assessment Year': The headline of the new Income Tax Act, 2025 is the retirement of the confusing 'Assessment Year' concept. Starting April 1, 2026, we simply move to a 'Tax Year.' The 60-year-old Act of 1961 is officially being replaced.
  • The 'Robo-Auditor' Glitch: AI is now driving enforcement. Many taxpayers recently received 'Mismatch Notices' regarding unlisted share sales. The AI mistakenly flagged Capital Gains as Business Income due to TDS code confusion. The fix? A simple manual correction on the portal, not panic.
  • The Shift: We are moving from 'Taxation by Declaration' (you tell the govt what you earned) to 'Taxation by Confirmation' (you verify what the govt already knows via the AIS).

The Bottom Line: As the December 31, 2025 deadline for belated returns looms, the job isn't just knowing the law anymore—it's teaching the algorithm how to read it.

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