Income Tax Department Flags Mismatch in ITR and Reporting Entity Information, Sends Advisory to Taxpayers

The Income Tax (I-T) department in India has sent out advisory communications to certain taxpayers regarding an apparent mismatch between disclosures made in their Income Tax Returns (ITRs) and information received from reporting entities. This move comes amidst social media posts discussing communications from the I-T department concerning discrepancies in Tax Deducted at Source (TDS)/Tax Collected at Source (TCS) deductions and ITR filing data.

Purpose of the Advisory

The I-T department clarified that these communications are not notices sent to all taxpayers but rather advisories issued in cases where there is an evident mismatch between the information provided in the ITR and the data received from reporting entities. The objective of these advisories is to assist taxpayers by making them aware of the information available with the I-T department regarding transactions reported by reporting entities during the year.

Responding to the Advisory

Taxpayers who receive such advisories are encouraged to respond promptly. They can provide their feedback online through the Compliance Portal of the I-T department. If necessary, they can revise their already filed returns or file a belated return if they have not done so yet. The last date for revising or filing a belated return for the Assessment Year (AY) 2023-24, relating to income earned in 2022-23, is December 31, 2023.

Reporting Entities and Their Obligations

Under the Income Tax Act, reporting entities are required to file Statements of Financial Transactions (SFTs) with the tax department. These SFTs contain details of certain financial transactions or any reportable account maintained by them during the year. Reporting entities include forex dealers, banks, sub-registrars, Non-Banking Financial Companies (NBFCs), post offices, issuers of bonds/debentures, mutual fund trustees, and companies paying dividends or buying back shares.

The I-T department's advisory communications aim to facilitate taxpayers in fulfilling their tax obligations accurately. By responding to these advisories and taking appropriate action, taxpayers can ensure that their ITRs align with the information received from reporting entities, thereby avoiding potential discrepancies and complications in the future.