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In a recent circular issued, the government has clarified that since the income mentioned in the return is on the net basis and therefore complete information is not available to make a comparison for the difference between the income in ITR form and Form 16, Form 16A and Form 26AS. In instances as such, income tax department will not issue notices.
Circular for ITR 1;
Circular for ITR 2, ITR 3, ITR 4, ITR 5 and ITR 6.
1. Highlights in respect of ITR 2, ITR 3, ITR 4, ITR 5 and ITR 6
- In case of ITR 2 & ITR 3, income under the head ‘Salary’ can be compared with the information available in Forms 16, Form 16A and Form 26AS on a gross basis. So in this case income tax notice can be issued in case of any difference between the two at gross level.
- In case of Capital Gains: Income under the head ‘capital gains’ being shown in any of the ITR Forms i.e. ITR 2, ITR 3, ITR 5 & ITR 6, may not be comparable with the information shown in Form 16, Form 16A and Form 26AS. Hence, income tax notice will not be served for any likely difference in.
- In case of ITR 3, ITR 5 & ITR 6, sometimes the receipts under the heads ‘income from house property’ or ‘income from other sources’ mentioned in Forms 16, Form 16A and Form 26AS may be shown under a different head in ITR. So in this case, income tax notice will not be served for any likely difference between the two.However, there are certain types of income which are only taxable under the head ‘income from other sources’. In case of such situations, if there is mismatch at gross level, then income tax notice can be issued.
- In case of ITR 3, ITR 5 & ITR 6, business receipts shown at gross level under the head ‘income from business or profession’ may not be comparable with the receipts shown in Forms 16, Form 16A and Form 26AS. Further, items in the P&L a/c such as commission, interest etc may be shown at a net basis whereas the details in the the Forms 16, Form 16A and Form 26AS are reported on a gross basis. Hence, income tax notice will not be served for any likely difference in business receipts as contained in ITR 3, ITR 5 & ITR 6 with the Forms 16, Form 16A and Form 26AS.
- In case of ITR 4, information about a particular income under the heads ‘salary’, ‘income from house property’, or ‘income from other sources’ is only on net basis and thus, complete information may not be available for the comparison with the information contained in the Forms 16, Form 16A and Form 26AS. Hence, income tax notice will not be served for any likely difference between the two. However if receipts under these heads are completely omitted, then income tax notice may be issued. Further in ITR-4, where income is shown both as per section 44AD and 44AE, it will be difficult to correlate the receipts in the return with the information in the Forms 16, Form 16A and Form 26AS. Hence, income tax notice will not be served for any likely difference between the two.
2. Likely Reasons for Receipt of Notice
The Income Tax Department has given the following options that could be the reasons for such mismatch :
- Deductions claimed in return but not in Form 16 – For instance you have claimed sec 80C deductions or any other deductions such as donation for charity,premium on health insurance u/s 80D directly in return and not through employer.
- Allowances exempt claimed in return but not in Form 16 such as HRA not claimed through employer but claimed in return.
- TDS has been claimed on advance received but no income in the financial year.For instance you have received the rental income for the month of April 2017 in March 2017 and TDS has been deducted on such rent.Now you have claimed such TDS in the return but income i.e rent of April month is not shown in the return.
- Income/receipts offered in previous year and TDS is claimed in financial year – it means you are claiming the TDS deducted on income of previous year on which TDS was not claimed in that previous year.
- Income is not chargeable to tax/exempt for instance you have shown dividend income received by you under the head Income from other sources but since this is exempt,no tax shall be paid on it. You must disclose the exempt income under the column given for exempt income u/s 10(34),10(38) or other.
- Interest Income/Net income is capitalized – You haven’t shown interest accrued on your FD’s as income in your return
- DTAA(Double Tax Avoidance agreement) income not taxable in India – In case of non-residents,if DTAA exists; then such income shall be exempt
- Income of the Trust/AOP is taxed in the hands of beneficiary/member.However TDS is deducted on the PAN of the Trust/AOP – Income of such Trust/AOP not included in the income of beneficiary/member
- Receipts considered under different head of income in the return as against the section under which it is deducted – For instance TDS deducted on rent u/s 194 I shown as Business income or income from other sources rather than showing as Income from house property
- Other – If your reason is not listed above ,you can choose option other.
Thus there is no need to worry if you have a valid reason for such a mismatch. There is an option given by the Income Tax Department whereby you can agree or disagree to such a mismatch and can choose the reason from the various options given as explained above. The time limit for replying to such a notice is 30 days from the date of receiving it.
3. Steps by Step Process to Respond to a Notice
Step 1 – Login to income tax account on https://incometaxindiaefiling.gov.in/. Click on the table- proceeding. If you have received notice,you will see the following page.
Step 2 – Click on the ‘PROCEEDING Name ‘ link to view the proceeding details. You will see the following page. Click on the Submit link under the Response tab to submit your responses.
Step 3 – Once you click submit, the following page will appear. It will give you the details of variance between return filed and the Form 16/16A or Form 26AS.
Step 4 – Carefully analyse the reason for the mismatch between the return filed and the relevant Form mentioned. Select whether you agree, partially agree or disagree to the addition. If you agree or partially agree, you must file a revised return.
Step 5 – If you disagree to the addition, you have to mention the reason for such disagreement. You have to select the reasons for incorrect disclosures from the list provided and submit your response.
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