Income Tax Alert to 3 Million Taxpayers

The Income Tax Department has sent alerts via text messages and emails to around three million salaried taxpayers across the country, stressing the apparent disparity between the tax deducted at source (TDS) and the refunds claimed by them in their amended tax filings, an official told.

“Since December 31st, 2023 was the last day for filing revised returns….we have sent alerts seeking explanations for the discrepancies in the returns filed for assessment years 2023-24,” the official explained.

This represents a significant increase in the frequency of such alerts sent, and the heightened monitoring is partly related to the establishment of a dedicated unit in Mysuru in October 2022 for centralised document matching and cross-verification.

The department provided taxpayers with the opportunity to file revised returns in order to correct inaccuracies in reported income (if any), deductions, bank details, personal information, omission of certain income, or mismatch of income between the original return and form 26AS/Annual Information Statement.

In a tweet on December 26, the department stated that the alerts were made to assist taxpayers and to make them aware of the information available with the department regarding the transactions recorded by the reporting businesses during the year.

“It is not a notice sent to all taxpayers, but is an advisory sent in only those cases where there is a noticeable mismatch between disclosures in the ITR and information as received from the reporting entity,” the post stated.

According to the official stated above, if taxpayers do not act on the alert, the department would issue notices to them on a case-by-case basis.

Experts say, the most prevalent mismatch is caused by a discrepancy between the investments stated to the employer and the investments disclosed by the employee in his/ her tax return. They say that in most situations, employees are unable to invest on time owing to a lack of finances and may claim a tax deduction during the return filing process, resulting in tax refunds.

“Normally, this is due to the house rent allowance, medical insurance, home loan repayments, tax-saving investments under 80C, and so on. Other obvious mismatches may be due to the sale of property over the year, as well as other high-value transactions such as the renewal of fixed deposits,” stated a tax professional.

IT authorities use artificial intelligence to find irregularities in ITRs. Furthermore, tax authorities use their authority under Section 133C of the IT Act to send notices requesting information from companies in order to verify the information in their possession relating to any employee.