Attention Taxpayers! Check I-T Dept’s Important Advise On ITR-TDS Mismatch

The Income Tax Department, on December 26, 2023 addressed discrepancies between disclosed information in Income Tax Returns (ITRs) and data from reporting entities. The department sent advisories to select taxpayers asking them to address these discrepancies and many taxpayers took to social media platform 'X' about these notices. The tax department responded to these posts saying, "Taxpayers may please note that such communication is to facilitate the taxpayers and make them aware of the information available with the ITD regarding the transactions reported by the Reporting Entities during the year."

"It is not a notice sent to all taxpayers but is an advisory sent in only those cases where there is an apparent mismatch between disclosures in the ITR & information as received from the Reporting Entity. Notices have not been issued to all taxpayers but are specifically sent when mismatches surface between ITR disclosures and data from reporting entities," the I-T Department added.

The department said that it is focused on reconciling Tax Deducted at Source (TDS) by companies with declarations in ITRs.

What Are Discrepancies That Can Be Detected?

Details regarding house rent allowance, medical insurance, home loan repayment, tax saving investments under 80c etc. are reported in both these documents. So any discrepancies in these data can be detected by the department.

Economic Times reported that notices under Section 133C have been served to many companies in Mumbai, Delhi, and other cities, to seek data on employee investments or companies deducting less TDS, highlighting the meticulous scrutiny by the department.

What To Do?

Says Vivek Jalan, Partner, Tax Connect Advisory, a multi-disciplinary tax consultancy firm, "Not only TDS/TCS deductions, under the I-T Act, reporting entities like sub-registrars for land registration are required to file statements of financial transactions (SFT) with the tax department containing details of certain financial transactions or any reportable account maintained by them during the year."

"So If a taxpayer has also purchased or sold a property, he/she would be getting an SMS along with an intimation to clarify certain matters w.r.t. the transaction. For example, they can ask you regarding the source of funds for purchase of the property. While this may be called a simple communication, but it is advised to provide a detailed reply and reconciliation so that a scrutiny notice can be avoided going forward," Jalan added.

Also check if there is an actual discrepancy between the TDS information and the ITR submitted. If there is an actual discrepancy one has to file a revised ITR. Taxpayers have until December 31, 2023, to file revised ITR without penalties. One can also submit belated ITR till December 31, 2023, and incur penalties, preventing potential legal repercussions.

Returns for 2022-2023 (Assessment Year 2023-2024) can be revised and filed until December 31, 2023, by choosing 'section 139(5)' when submitting ITR. Incorrect income reporting can lead to penalties of up to 200 per cent of the tax on misreported income.