Received Income Tax Notice for Mismatch in Income with Form 16/16A? Here’s What You Need to Do

Form 16 issued by an employer serves as an important document while filing return. Generally, the income mentioned in Form 16 and the return filed by you should match if you have declared all your income and details of tax saving investment proofs to your employer. But if not, then your income may be different from Form 16.

For instance, if you haven't submitted the rent receipts to your employer before the 31st March deadline, but since HRA can be claimed through return also, you claimed HRA in your return and so your income filed in the return will not match with the amount shown in Form 16. Due to this mismatch in return and Form 16, some people have received notices under Section 143(1) from the Income Tax Department to justify the reasons for such a mismatch.

Recently the government in its circular dated 11th Oct, 2017 clarified that since the income mentioned in ITR forms is on net basis and so complete information is not available to make comparison for the difference between the income in ITR form and as per Form 16/16A/26AS.Thus Income Tax department will not issue the income tax notices in such cases i.e. mismatch of income mentioned in ITR and as per Form 16/16A/26AS.

In cases where notices has already been issued to the taxpayer, will also be dealt as per the directions issued by the Income Tax Department.If the taxpayer has already filed a revised return in response to such notice, it will be treated as valid.

However if any head of income has been omitted in ITR whereas it is mentioned in any of the form 16/16A/26AS, then notice will be issued to such person.

Circular can be referred here

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/exemptfor 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.

The following steps explain how to respond in such a notice:

Step 1. Login to income tax account onhttps://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 or disagree to the addition from the dropdown list under response tab.

Step 5. If you disagree to the addition, you have to mention the reason for such disagreement. You have to choose from the reasons given in the dropdown list under response tab(also explained above in this article). You can also give justification explaining the reason under justification tab.

Reach out to support@cleartax.in if you need further help.

Source :Cleartax