Income Tax Notice: Have you filed an early income tax return before the Annual Information Statement (AIS) was introduced? If you failed to report some important income received during the financial year, you may have received a demand notice.
Before filing returns, one had to check the annual tax statement or Form 26AS. On November 1, 2021, the AIS was launched for the first time. The AIS covers full data of savings bank interest, dividends, capital gains transactions, and share transactions, whereas Form 26 AS only mentions high-value transactions and tax deductions at source.
Due to a data mismatch between Form26AS (from NSDL) and the pre-filled income tax forms, several taxpayers received lesser refunds this year.
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What are the reasons of notice?
The AIS, which was just released, is a comprehensive document that provides a lot of information, including savings bank interest, shares transactions, mutual fund buy and sale and dividends. The existing Form 26 AS only showed FD interest and did not include much information. Those who didn’t have access to the AIS information before and filed returns solely on the basis of Form 26AS have received notices.
1. Not disclosing all income
A person who had forgotten to disclose the interest on an old savings account that he hardly uses. As he was not having the account’s passbook or online access, he didn’t include the savings interest since he was in a hurry to file the returns.
Since he filed his return in October 2021, he didn’t have access to the AIS, he received demand notice against the bank interest income as his income comes under taxable slab.
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2. Differing amount mentioned
Many notices have been issued due to the mismatch between the actual taxable amount and the reported transaction amount.
Numerous adjustment-related notices are received. Due to the reason that AIS has taken into account the actual cost for capital gains. However, when it comes to capital gains, an indexed cost must be included. An income tax notice has been issued under Section 143(1) due to a discrepancy between net and gross taxable income.
People had 30 days to respond to the notice, but the income tax portal wouldn’t let them submit their responses, so he had to use the manual response method.
Read Also: 10 Key things taxpayers must know about New Form 26AS
3. Share Transactions
There is also a difference in share selling transactions. The value of the actual taxable sale never matches the amount stated in the AIS since the gross amount is the closing value of the day and includes brokerage and other fees. The notices are computerised and based on AIS figures, and even indexed costs aren’t taken into account.
When it comes to joint holdings in shares and mutual funds, double reporting (amount reflected under two PANs) is done for certain financial activities.
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How to avoid such Income Tax notices?
If you haven’t filed your tax return yet, double-check both the Form 26 AS and the AIS before filing ITR. Remember to account for all bank accounts when calculating savings bank account interest and dividends. Remember that certain income isn’t taxable, but it still needs to be reported on your tax return.
This is especially important this year because there is no additional time to revise returns. If there is a mismatch issue, tax assessees will not have any option to revise their tax returns this year because the filing due date and the window to revise one’s returns both end on December 31, 2021.
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