If you have claimed a refund of TDS by showing lesser income or claiming higher deduction in Income Tax Return (ITR), expect a notice from the Income Tax Department.
By Naveen Wadhwa
If you have claimed a refund of Tax Deducted at Source (TDS) by showing lesser income or claiming higher deduction in Income Tax Return (ITR), expect a notice from the Income Tax Department to reconcile the two tax documents – Form 16 and Income Tax Return.
This year the Income Tax department is sending tax notices on email to the taxpayers to explain the mismatch of particulars shown in Form 16 and ITR. This mismatch arise in the following two scenarios:
Scenario First: Investment proof not furnished to employer
When an employee had made investment in tax-saving instruments but he failed to furnish proof of investments to employer. It might happen that taxpayer was not able to claim genuine deductions for HRA or Section 80C due to his failure to furnish proof of rental payments, insurance premium, etc. to the employer. In this case, employees can show lesser income or claim higher deduction while filing return of income.
Scenario Second: Fake Investments Declarations
When employee had not made any investment in tax-saving instruments but claims deduction of the same in his Income-Tax Return. This is a wrong practice of showing lesser salary income or claiming fake deductions.
Who will get such notice?
Taxpayers who are claiming tax deduction in ITR Forms which are not mentioned in Form 16. This is the foremost reason to invite tax notices.
For instance, a taxpayer who has claimed deduction under Section 80C or for HRA directly in ITR without submitting any proof of such investments or payment of rent to the employer would get a notice from the Dept.
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How to avoid such tax notice?
Form 16 is issued by the employer to employee as a proof of tax deduction on the salary income. It has two parts (i.e., Part A and Part B). Part A includes general information such TAN & PAN of employer, summary of TDS, name and address of the employer and employee. While Part B contains vital information such as detailed breakup of salary, deductions allowed, relief claimed, tax payable or refundable, etc.
You can avoid such tax notice by considering following points:
# Salary income shown in your return should match with the salary income shown in Form 16
# Deductions claimed in ITR should match with the deductions shown in Form 16
# Declare all other income on which tax has been deducted by the payer (i.e., rental income, interest income, etc.)
# After filling all columns of ITR there should be nil tax demand.
# Declare all other in the Income-tax Return and pay taxes accordingly while filing the return.
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How to deal with such mismatch tax notice
There is no need to panic if you have valid reason for such a mismatch. You need to give reasons for such mismatch within 30 days from the date of receipt of notice. You need to follow these steps to give a reply to such notice:
1. Enter your login credentials at www.incometaxindiaefiling.gov.in.
2. Click on e-proceedings to see the notice issued under section 143(1) and submit your response.
3. On submitting response, you can see the differences between return filed and Form 16 or Form 26AS.
4. Analyse the reason for the mismatch between the return filed and Form 16.
5. Submit your agreement/disagreement to the addition and give reasons for disagreement.
6. You can select following reason for such mismatch:
# Deductions claimed in the return but not in form 16; or
# Exemption for allowances claimed in the return but not in form 16
This is the way how you can justify the reasons for mismatch and submit your response at income tax portal online without visiting the Income Tax Department.
(The author is DGM, Taxmann)