Beware of income mismatch in ITR and Form 16-16A

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Beware of income mismatch in ITR and Form 16-16A

Category : GST

Let’s discuss section 143(1)(a) which has been amended in Budget 2017. According to this section, if there is any mismatch i.e. lower income declaration found in the income tax return as compared to Form 26AS/ Form 16 / Form 16A, notice asking explanation of the difference amount shall be sent to the assessee. On failure to submit response within 30 days of issue of notice, such amount shall be added to the total income of the assessee and tax shall be recovered on the same as per the provisions of the income tax act.

Let’s understand…

If assessee has claimed any allowance or deduction while filing return of income (eg. Mediclaim u/s 80D Rs 20,000), which was not considered by employer in Form 16, then he/she must compulsorily face the Income Tax Notice enquiring the same. If assessee failed to response that notice within 30 days, then differential amount between Form 16 and Return of Income (i.e Rs 20,000) will be automatically added to his income and return would be processed accordingly asking assessee to pay tax on such amount.

In simpler language, everyone will get notice unless Income shown in Return matches exactly or more than the Form 16/16A. So, before making any such claim now in return of income, ensure that you have valid evidences for same.

This amendment is going to hit hard for those Income Tax Assessees (Majorly Salaried Employees) who used to make manipulative claims of allowances (LTA, medicalaim, HRA etc) or deductions (Section 80C, 80D, Donations) in Return of Income and claims refund of TDS deducted from Salary.

So unlike earlier year, you will not get your Income Tax Refund within one or two week, because of this prolonged process introduced right before processing the Income Tax Return.

Below are sample instances for which one may receive a notice from department:

  • Deductions such as 80C or 80D or other claimed in return but not in Form 16 by employer.
  • Exempt Allowances such as HRA or LTA or Medical Allowances not claimed through employer (i.e in FORM 16) but claimed in return.
  • Interest Income accrued on Fixed Deposit not shown.
  • Donation Receipts

How to respond these Notices?

Before responding these notices, carefully analyse the reason asked in notice and then submit the appropriate explanation as per the facts of your case under the tab “e-proceeding” after Login your Income Tax Account.

One should consult their CA or tax expert before proceeding or submitting any response to these notices.

So, this year beware of filing return of income with any such claims unless you don’t have sufficient evidence or proof. Though this kind of action will help government to eliminate few thousands tax evaders, but at the same time it would cost delay in Income Tax refunds for Lakhs of genuine tax payers also.


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