June 2025 - 9Point Capital

In 2025, the Income Tax Department of India is rolling out a powerful backend surveillance system that automatically verifies your claims with external data sources in real time. It’s called income tax cross-verification and it could impact every salaried individual, freelancer, or investor filing under the old tax regime.

What Is Income Tax Cross-Verification?

Income tax cross-verification refers to the automated matching of your claimed deductions with data received from external reporting agencies. Your PAN and Aadhaar are now the anchors for this ecosystem.

The system pulls data from:

Banks – Fixed deposits, interest income, loan EMIs
Insurance companies – Premiums paid for LIC or term policies
Employers – Form 16, salary components like HRA and allowances
Government databases – Investment declarations, EPF contributions, tuition fees
mParivahan – Vehicle ownership and loan data for EVs

This ensures that what you claim on your ITR aligns with what third parties report to the tax department, in real time.

Why the Tax Department Is Enforcing Cross-Verification in 2025

This push toward data-driven tax compliance is part of India’s broader digital transformation under initiatives like:

Faceless Assessment 2.0
Real-time reporting via AIS (Annual Information Statement)
Expansion of TIS (Taxpayer Information Summary)

Objectives:

Detect inflated or duplicate deduction claims
Reduce refund fraud and manual scrutiny
Improve taxpayer accountability
Encourage voluntary, correct disclosure

Key Compliance Changes Taxpayers Must Know in 2025

As per the old tax regime, taxpayers must now comply with a stricter and more structured filing framework:

1. Break Down Every Deduction

Gone are the days of claiming ₹ 1.5L under Section 80C without detail. You must now itemise your investments, such as:

₹50,000 – ELSS mutual fund
₹60,000 – LIC premium
₹40,000 – PPF deposit

Omitting this detail or submitting rough totals will delay your refund or invite automated queries.

2. Updated Documentation Requirements for Common Deductions

You’re now expected to submit or retain a wider range of documents for verification, including:

– HRA (House Rent Allowance)

Taxpayers claiming HRA exemption must now provide comprehensive details:

Place of Work
Actual HRA Received
Actual Rent Paid
Basic Salary and Dearness Allowance
50% or 40% of Basic Salary, depending on whether the city is metro or non-metro.

– Section 80C Tax Deductions

LIC policy bonds
ELSS fund statements with folio numbers
PPF passbook entries

– Section 80D Deductions

Name of the Insurance Company
Policy or Document Number

– Loan Deductions (80E, 80EE, 80EEA, 80EEB)

Name of the Lender
Bank Name
Loan Account Number
Date of Loan Sanction
Total Loan Amount
Loan Outstanding as on 31st March

3. Live Mismatch Alerts Through AIS/TIS

The Income Tax portal now uses real-time discrepancy detection. If your claimed amount:

Doesn’t match AIS records
Exceeds limits without proof
Overlaps with employer-filed returns

You may receive a notice under Section 143(1) or be prompted to revise your ITR.

What Happens If Your Claims Are Flagged?

If any part of your return doesn’t match the cross-verified data:

Missing HRA or loan details can lead to a rejection of the deduction
Incomplete returns may face delays or scrutiny
Ensure all required disclosures to avoid compliance issues

Best Practices for Cross-Verification Compliance for 2025

Cross-check your Form 26AS, AIS and TIS before filing
Maintain a folder of all ITR documentation required
Avoid “guesstimate” entries; only claim what you can prove
Get a pre-filing review done by a tax expert if needed
Ensure 100% compliance with tax filing compliance in India regulations

Final Thoughts

Income tax cross-verification is the future of how taxes will be filed and verified in India. With digital audits, instant alerts and real-time validation becoming the norm, your best strategy is preparation and precision.

If your numbers don’t match the system, the system will know. File clean. File confidently.

Explore more expert insights on tax compliance and filing:

Let’s break down what the Sortino ratio is, how it’s calculated and why it matters. This is especially important if you’re planning to invest in PMS or evaluating portfolio management services in India.

What Is the Sortino Ratio?

The Sortino ratio is a risk-adjusted performance measure that indicates how much return an investment generates for every unit of downside risk.

Unlike the Sharpe ratio, which treats all volatility as detrimental, the Sortino ratio focuses solely on negative returns, the kind that harm your portfolio. It doesn’t penalise you for strong performance or upward momentum.

In simple terms, the Sortino ratio helps you judge how efficiently an investment earns profits without exposing you to large losses.

If you’re exploring portfolio management services in India, this metric helps you filter between managers who simply chase returns and those who manage risk prudently.

Why Investors Use the Sortino Ratio

1. Focuses on Downside Risk Only: It ignores volatility caused by gains and only considers periods where your returns fall below a threshold, usually the risk-free rate.

2. Ideal for PMS and Wealth Management: When you invest in PMS, you’re often trusting a manager with large sums. You want high returns, but with controlled downside risk. Sortino tells you how well the manager is achieving that.

3. Better Comparison Tool: Two funds may show the same returns, but the one with fewer deep drawdowns will have a higher Sortino. That makes it a safer choice.

How to Calculate Sortino Ratio

Here’s the official formula:

Sortino Ratio = (Average Return – Risk-Free Rate) ÷ Downside Deviation

Let’s break it down:

Average Return: The annualised average return of your portfolio or investment
Risk-Free Rate: Typically, the return on a government bond (e.g., 6% in India)
Downside Deviation: The standard deviation of negative returns only, i.e., how much your portfolio fell below the risk-free rate

Example: How to Calculate Sortino Ratio

Let’s say you invest ₹50 lakhs in a PMS. Here’s the data:

Average Annual Return: 15%
Risk-Free Rate: 6%
Downside Deviation: 4%

Now plug it into the formula:

Sortino Ratio = (15 – 6) ÷ 4 = 9 ÷ 4 = 2.25

Interpretation:

A Sortino ratio of 2.25 means your portfolio is earning 2.25 units of return for every unit of downside risk. That’s a strong performance. Most professionals consider anything above 2 as excellent.

Sortino Ratio vs. Sharpe Ratio

Here the general differences between sortino and sharpe ratios:

Feature	Sharpe Ratio	Sortino Ratio
Measures	Total volatility (up and down)	Only downside volatility
Penalises	Both gains and losses	Only losses
Ideal For	Broad comparison	Downside risk analysis
Use in PMS?	General overview	More accurate for risk protection

If your goal is capital protection along with growth, especially relevant when you invest in PMS, the Sortino is more useful than the Sharpe.

When Should You Use the Sortino Ratio?

Comparing multiple PMS strategies that claim similar returns
Evaluating mutual funds, ETFs, or alternative investments
Selecting stable portfolios with a long-term horizon
When your investment objective prioritises wealth preservation

If you’re considering high-ticket portfolio management services in India, ask about their Sortino ratio to evaluate how well they manage downside risk.

Limitations to Keep in Mind

Requires historical data to compute accurately
Doesn’t penalise erratic positive returns, which could be risky for some investors
Assumes the risk-free rate is constant, which may not always be true

Still, when used properly, the Sortino offers a clearer, more practical picture of investment quality.

Summing Up

In the world of investing, returns without context can be misleading. The Sortino ratio gives you a sharper lens to evaluate:

Is the portfolio growing your wealth?
Is it doing so without exposing you to large risks?

So the next time a manager promises double-digit returns, go one step further and ask:

“What is the Sortino ratio of this strategy and how do you manage downside risk?”

Because in the long run, it’s not just about how high your portfolio climbs, but how well it avoids the fall.

Looking to invest in PMS with strong downside protection?

Understanding the Sortino ratio is your first step. Choosing the right partner to apply to is the next step. 9Point Capital helps you compare options, decode manager strategies and build a portfolio that works for you, not against you.

Read for more expert investor guidance and actionable insights:

Month: June 2025

Income Tax Cross-Verification: What You Must Know in 2025