Check why you can get income tax notice

Taxpayers filing their Income Tax Returns (ITR) should carefully verify details reported in forms such as 16, 26AS and the Annual Information Statement (AIS), as mismatches in reported income or tax credits can attract scrutiny from the Income Tax Department. CA (Dr.) Suresh Surana has pointed out some of the commonly observed mismatches that may lead to scrutiny or post-filing notices from the Income Tax Department.

Salary income mismatch

Where salary income reported in ITR differs from the salary disclosed in Form 16, TDS returns filed by the employer or reflected in AIS, the Income Tax Department may seek clarification regarding any under-reporting of income, says Surana.

Interest income not reported

Surana explains that interest earned on savings bank accounts, fixed deposits (FDs), recurring deposits (RDs), income tax refunds, etc., often appears in AIS based on reporting by banks and financial institutions. Non-disclosure or the partial disclosure of such income in ITR may result in a mismatch notice.

TDS/TCS mismatch

Claiming excess Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) credit that does not reconcile with Form 26AS or AIS may lead to the adjustment of refund claims or the issuance of a notice seeking justification, explains Surana.

High-value financial transactions not disclosed

Transactions such as large mutual fund investments, purchase or sale of immovable property, substantial credit card payments, foreign remittances or securities transactions reflected in AIS but not aligned with declared sources of income may attract scrutiny, says Surana.

Capital gains mismatch

Surana said that the sale of shares, mutual funds, property or other capital assets may be reported in AIS by intermediaries. However, incorrect computation or the omission of capital gains in ITR could trigger an inquiry.

What is AIS?

Annual Information Statement (AIS) is a statement that provides complete information about a taxpayer for a particular financial year. It contains information about taxpayers' incomes, financial transactions, tax details, etc. A taxpayer can access AIS information and submit their response (if needed) by logging into their income-tax e-filing account.