Received Advance Tax Notice with Inflated Demand? Here’s What to Do

If you’ve recently received a message from the Income Tax Department regarding significant financial transactions for FY 2023-24 (AY 2024-25), it’s essential to take action. In some cases, taxpayers have reported receiving advance tax notices with inflated tax demands due to inaccurate reporting of financial transactions in the annual information statement (AIS).

According to chartered accountants interviewed by Mint, the erroneous information has been primarily linked to reporting entities in the securities market. Nitesh Buddhadev, founder of Nimit Consultancy, advised that individuals involved in shares may have received such notifications.

The Income Tax department has acknowledged the issue and stated that inconsistencies in the data provided by one reporting entity in the securities market (SFT-17) were identified following taxpayer feedback on the e-campaign for advance tax. The reporting entity has been requested to submit a revised statement, which will subsequently update the AIS. Taxpayers are advised to await further updates based on the revised statement.

With the deadline for paying advance tax approaching on 15th March, it’s crucial for taxpayers to calculate their advance tax liability based on their actual transactions during the financial year rather than relying solely on the AIS. As Buddhadev emphasized, it’s important not to hastily pay the demanded tax and instead refer to statements from brokers or mutual funds to calculate the tax liability for the current quarter.

Considering the IT department’s instruction to await updates on the AIS, the error is anticipated to be resolved promptly. Buddhadev reassured taxpayers that concerns about paying interest on unpaid tax should be alleviated as the AIS will be rectified in due course.