The introduction of pre-filled income tax forms by the Income Tax Department aims to simplify the process of filing tax returns. By auto-populating information obtained from the returns filed by others like employers, banks, mutual funds, and other deductors, the department intends to ensure that taxpayers report their income accurately. While this innovation has been well-received by many, caution and thoughtful consideration are required when relying solely on pre-filled ITRs.
Taxpayers must understand that the ultimate responsibility for the accuracy of the income tax return lies with them, not the income tax department. Even though the information may be pre-filled, taxpayers are still obligated to verify and confirm the correctness of the details provided. Any errors in the ITR will be the taxpayer’s sole responsibility and could lead to potential penalties or legal issues.
Reporting income
One of the potential pitfalls of relying solely on pre-filled data is the possibility of reporting a higher income than what is accurate. For instance, if a taxpayer wants to claim an exemption for house rent allowance, the detail of this exemption is not pre-filled in the income tax return, and if the taxpayer relies solely on the pre-filled data, she may end up paying more taxes than necessary. Moreover, there is a limited timeframe within which taxpayers can file a revised return, typically three months before the end of the assessment year or completion of the assessment, whichever is earlier. Beyond this period, taxpayers lose the option to correct any errors or omissions in their returns, resulting in the loss of excess taxes paid.
Conversely, if the taxpayer’s actual income is higher than what is pre-filled, the onus then shifts to the tax department to establish that income has escaped declaration. For example, in the case of income from a profession on which no taxes are deducted at source. This income will not be reflected in data pre-filled, and the taxpayer cannot simply rely on the pre-filled information as an excuse for not declaring additional income. Documentary evidence such as bank statements, payroll slips, rent agreements, and other supporting documents, plays a crucial role in determining income accurately. Any inconsistencies in the taxpayer’s declarations could trigger further scrutiny, even based on lifestyle patterns like foreign travel, credit card payments, or social media profiles.
Data mismatch
If discrepancies are noticed between the pre-filled data and the actual transaction details, it becomes the taxpayer’s responsibility to have the data on the income tax website rectified. Mismatched information raises the probability of tax scrutiny, making it vital to keep all relevant documents on hand to support their claims.
While the concept of pre-filled data is groundbreaking and the income tax department continuously updates and refines the automation process to reduce errors, it still relies heavily on data submitted by third-party sources. Therefore, taxpayers should exercise diligence and not blindly rely on pre-filled data to avoid potential litigation. While this innovation simplifies the filing process, taxpayers must actively review and validate the pre-filled information to ensure its accuracy. They should treat pre-filled data as a helpful tool rather than a substitute for their own due diligence in reporting their income and complying with tax laws.
The writer is partner, Nangia Andersen India. Inputs from Neetu Brahma
GET IT RIGHT
- If actual income is more than what is pre-filled, onus is on I-T department to establish that income has escaped declaration
- Bank statements, rent agreements, payroll slips, etc., play a crucial role in determining income accurately