The Central Board of Direct Taxes (CBDT) has started issuing notices for Income Tax Returns (ITRs) discrepancies. If your filed ITR doesn’t match the details in your Annual Information Statement (AIS), you could be at risk of penalties. With tax authorities tightening compliance measures, ignoring these notices can lead to unnecessary legal trouble and financial strain.
If you have received an ITR mismatch notice, you must act fast. Understanding the reason for the mismatch and responding correctly can save you from hefty fines. In this article, we’ll explain why CBDT is issuing these notices, what they mean for you, and how you can fix the issue before it escalates.
About CBDTs Campaign
CBDT has started sending alerts through emails and SMS to taxpayers whose annual information statement data does not match the income tax returns they file. You may receive a notification if:
- You haven’t filed your ITR despite having notable financial transactions.
- Your AIS shows high-value transactions that do not align with your declared income.
This initiative is part of the e-Verification Scheme, aiming to:
- Promote voluntary tax compliance.
- Reduce tax evasion.
- Improve transparency in tax administration and ensure you report your income correctly.
What Are AIS and ITR?
To get into the depth of such notices, you first need to understand AIS and ITR properly:
Income Tax Return (ITR)
The Income Tax Return (ITR) is a form you must file annually to report your income, expenses, deductions, and taxes paid. It helps the government assess your tax liability and ensures you comply with tax laws. Filing your ITR on time avoids penalties and keeps your financial records in order.
Annual Information Statement (AIS)
The Annual Information Statement (AIS) is a report of your financial activities. It includes details on TDS, TCS, high-value transactions like property purchases or large deposits, and earnings from dividends or interest. AIS helps the tax department verify your reported income for accuracy.
CBDT Notices On Discrepancies Between ITR and AIS
These mismatches may result in penalties, interest on unpaid taxes, or legal scrutiny. Addressing discrepancies quickly helps you stay compliant and avoid further issues. Always verify that your ITR correctly reflects the data in your AIS to prevent unnecessary complications with tax authorities
Why Is It Crucial to Respond to This Notice Immediately?
Getting a notice from the CBDT is a serious issue. Here’s why you need to respond without delay:
Avoid Penalties
Ignoring the notice can lead to hefty fines and interest on unpaid taxes. If your ITR has discrepancies, resolving them quickly prevents additional financial burdens.
Prevent Legal Scrutiny
Failure to respond may attract tax audits or investigations. The Income Tax Department may examine your financial records more closely, leading to unnecessary legal trouble.
Maintain Tax Compliance
Clearing discrepancies ensures a clean financial record. It helps you stay eligible for future loans, investments, and other financial activities without complications.
Read More: Crypto Tax Evasion In India
Who Can Receive Such Notices?
You may receive a notice from the CBDT if you fall in one or more of the below categories:
Non-Filers
If you have taxable income or financial transactions in your AIS but have not filed your Income Tax Return, you might receive a notice.
High-Value Transaction Holders
Large deposits, property purchases, or stock market investments that do not align with your declared income can trigger a notice.
Tax Evaders
If you have underreported or hidden income, the tax department may flag your case for scrutiny.
How To Address Such ITR Notices?
Follow these steps to identify and resolve any discrepancies.
Step 1: Log In to the Income Tax Portal
Visit the official Income Tax Portal and log in using your PAN or Aadhaar-linked credentials. This gives you access to your tax records.
Step 2: Access Your AIS
Go to the Annual Information Statement (AIS) tab. Choose the relevant financial year to view your transaction details.
Step 3: Review Your AIS
Compare the transactions in your AIS with the income declared in your ITR. Look for missing income sources or incorrect amounts that may have triggered the notice.
Step 4: Submit Feedback
If you find errors or mismatches, submit feedback online to correct them. This ensures your tax records remain accurate.
Step 5: File or Revise Your ITR
If you haven’t filed your ITR, submit it immediately. If your filed ITR contains errors, revise or update it before the deadline to avoid penalties.
Read More: Everything About ITR-U
Key Deadline To Answer Discrepancies
The CBDT has set strict deadlines to resolve tax discrepancies and file updated Income Tax Returns (ITRs). Missing these dates can result in penalties or further action from tax authorities.
Deadline to File ITR for FY 2023-24
You must file any late or updated ITRs for the financial year 2023-24 by January 15, 2025. Ensure your filings match your actual financial transactions to avoid issues.
Deadline to File ITR for FY 2021-22
The extended deadline to submit updated ITRs for FY 2021-22 is March 31, 2025. Filing on time helps you stay compliant and prevents unnecessary penalties.
Consequence Of Not Answering To Such Discrepancies
Failing to respond to CBDT alerts regarding discrepancies in your tax filings can lead to serious consequences. You must address these issues promptly to avoid financial and legal troubles.
Penalties on Non-Compliance
If you fail to file or delay filing your ITR, you may face penalties under:
- Section 234F: A penalty of up to ₹10,000 for late filing.
- Section 234A: Additional penalties if you have outstanding taxes.
Interest on Unpaid Taxes
If you owe taxes and do not pay them on time, you may be charged:
- Section 234B: Interest on unpaid advance tax.
- Section 234C: Interest for delays in paying instalments of advance tax.
Legal Consequences
Ignoring multiple notices may result in:
- Audits or investigations.
- Prosecution for tax evasion.
Negative Credit Impact
Non-compliance can lower your credit score, affecting loan approvals and financial credibility.
Read More: Which Tax Form To File In FY 2024-25
What Do You Do If You Receive A Notice For a VDA Transaction?
If you traded in cryptocurrencies and made significant gains but didn’t report them in your Income Tax Return (ITR), the Central Board of Direct Taxes (CBDT) might issue a notice. The tax authorities monitor Virtual Digital Asset (VDA) transactions, and failure to report them can lead to legal consequences. The notice is a request to justify why you didn’t declare your crypto income.
Stay Calm and Take Immediate Action
Receiving a notice can be stressful, but there’s no need to panic. The best approach is to address the issue quickly and accurately. You must verify your past transactions and check whether you reported your crypto gains correctly. If you missed reporting them, please reach out to KoinX.
KoinX helps you integrate your accounts from over 300 exchanges, wallets, and blockchains. By doing this, you can generate an accurate tax report that reflects all your transactions. Before submitting the report, cross-check the details to ensure there are no discrepancies.
If you face any difficulties integrating your exchanges or wallets, you can seek help by referring to our integration blog. You can also reach out to our customer support via email at support@koinx.com.
Conclusion
Ignoring an ITR mismatch notice can lead to unnecessary penalties and scrutiny from tax authorities. Fixing discrepancies on time ensures you stay compliant and avoid last-minute stress.
However, handling tax mismatches can be tricky, especially if you trade crypto. That’s where KoinX makes life easier. With KoinX, you can generate ITR-compliant tax reports in minutes and even hire a CA to file your taxes accurately. Don’t wait for penalties—fix your ITR mismatch today with the right tools. Get started with KoinX now!
