e-Verification Scheme 2021 - Reconciliation on Income Tax Mismatches

The Income Tax Department had observed a few discrepancies between reported interest and dividend income and the details filed in their income tax returns. Hence, to address these mismatches, particularly for the financial years 2021-22 and 2022-23, the department had implemented the E-Verification Scheme 2021. It was launched in December 2021 and launched in September 2022, it aimed to streamline the resolution process for taxpayers facing these issues. 

In this article, we will discuss about the following:

• Meaning of e-Verification Scheme 2021
• e-Verification Scheme work
• Resolving the mismatches
• FAQs

What is the E-Verification Scheme 2021?

The Income Tax Department introduced the ‘E-verification Scheme 2021’ as a solution for taxpayers who faced mismatch issues on the IT portal by responding to it through the e-verification portal. The scheme was introduced on December 13, 2021, and the pilot program was launched in September 2022. It was implemented in February 2024.

The Income Tax Department has identified a mismatch between third-party details in interest and dividend income and income tax returns filed by the taxpayers. In many cases, taxpayers have not even filed the income tax returns. 

The information mismatch relating to the Financial Years 2021-22 and 2022-23 is available on the Compliance portal. Taxpayers were made aware of the mismatch via SMS and emails as per details available with the department. 

How does the E-verification Scheme Work? 

If the reporting entity confirms the information provided under Section 133(6), it will request an explanation regarding why the mentioned transaction is not included in the ITR. When the communication is made to the taxpayer, they must confirm the information provided and state it is incorrect. Or if the taxpayer disagrees, then they have to provide documents that prove it to the Income Tax Department. According to the response given by the taxpayer, the Income Tax Department forms an opinion and sends a communication to the taxpayers. 

How do you Resolve the Mismatch?

To reconcile the mismatch of issues, an on-screen functionality has been made available on the Compliance portal for taxpayers to respond. 

Taxpayers registered on the e-filing website can navigate to the Compliance portal and log in. Details regarding mismatches will be displayed in the ‘e-verification’ tab. 

Taxpayers who did not register have to register themselves on the portal and fill in the required details. Then, the individual can log into the portal and access the Compliance portal to view the mismatch. 

The on-screen functionality is self-contained and can furnish a response to reconcile the mismatch. No document is required to be furnished. This is an initiative by the Income Tax Department to provide taxpayers with an opportunity to respond to the communication. It is clarified that said communication is not a notice. 

Taxpayers unable to explain the mismatch may consider furnishing an updated income tax return, if eligible, to make good any under-reporting of the income. Taxpayers can file updated returns for FY 2020-21 and FY 21-22 until March 2024 and March 2025, respectively.