The Income Tax (IT) department has escalated its scrutiny by sending alerts to approximately 3 million salaried taxpayers, drawing attention to disparities between Tax Deducted at Source (TDS) and refunds claimed in their revised tax returns. This surge in alerts is linked to the establishment of a specialized unit in Mysuru in October 2022 for centralized matching and cross-verification of documents.
Details of the Alert
As of December 31, 2023, being the deadline for filing revised returns, taxpayers are receiving alerts requesting explanations for discrepancies in returns filed for assessment years 2023-24. The alerts aim to prompt corrections in reported income, deductions, bank details, personal information, omission of certain income, or mismatch of income between the original return and Form 26AS/Annual Information Statement.
Increased Monitoring and Special Unit
The heightened vigilance is attributed to the special unit in Mysuru, established in October 2022, indicating a significant augmentation in the department's capabilities for centralized matching and cross-verification of documents.
Department's Clarification
On December 26, the IT department clarified through a post on X that the alerts are meant to facilitate taxpayers, making them aware of the information available regarding transactions reported by reporting entities during the year. The advisory is not a notice sent to all taxpayers but specifically to those with apparent mismatches in disclosures between the Income Tax Return (ITR) and information received from reporting entities.
Potential Consequences
Failure to address the alerts may result in the IT department issuing notices on a case-by-case basis, indicating potential further scrutiny for taxpayers.
Experts' Insights
Experts have identified common mismatches, attributing them to differences between investments declared to employers and those disclosed in tax returns. Factors such as house rent allowance, medical insurance, home loan repayments, and tax-saving investments under section 80C contribute to these disparities.
Utilization of Artificial Intelligence
Experts highlights that tax authorities leverage artificial intelligence to identify discrepancies in Income Tax Returns (ITRs). Additionally, utilizing powers under section 133C of the IT Act, authorities issue notices to companies, seeking information to verify details related to employees.
Conclusion
The increased scrutiny by the IT department, aided by advanced technology and specialized units, emphasizes the importance of accurate reporting and timely correction of discrepancies in tax returns. Taxpayers are advised to respond promptly to the alerts to avoid potential notices and ensure compliance with tax regulations.
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