If you’ve received a notice to pay additional tax, it’s important to understand how a rejection of your tax deducted at source (TDS) claim can lead to unexpected payments. The income tax department has a stringent system in place to check for discrepancies between TDS information reported in your income tax return (ITR) and the data supplied by the TDS deductor.
When the TDS is erroneously reported by a deductor, such as a bank that deducts TDS from a fixed deposit but fails to accurately report it, the tax department will deny the TDS claim. Consequently, if there are any outstanding taxes after the ITR filing, you will have to settle the tax liability without the benefit of the TDS credit not reflected in Form 26AS.
Taxpayer data is recorded in Form 26AS, Annual Information Statement (AIS), and Tax Information Summary (TIS) to simplify data verification for ITR filing.
In the event of a TDS mismatch, the taxpayer will typically receive a communication from the tax department, underscoring the need for accurate reporting of TDS data to prevent complications.
Tax Credit Mismatch in TDS Data: ITR vs. Form 26AS
Discrepancies between TDS data reported in your ITR and that in Form 26AS can occur for several reasons. Upon successful processing of your ITR, you will receive an intimation under section 143(1), which outlines the calculations submitted versus those accepted by the tax authorities. If your TDS credit claim is disallowed, the accepted calculation will reflect a higher tax liability.
Identifying a Tax Credit Mismatch
To verify whether there is a mismatch in your tax credits, follow these steps:
- Navigate to the Tax Credit Mismatch section and input your relevant details.
- Review the amounts for TDS, Tax Collected at Source (TCS), or any other challans.
- Compare these amounts with those listed in Form 26AS.
- A difference between your submitted amounts and those in Form 26AS indicates a tax credit mismatch.
- You will see a message stating “There is a mismatch” if discrepancies exist.
- If no discrepancies are found, it will display “Tax Credit Claimed is Fully Matched with Tax Credit Available in Form 26AS.
The income tax department stresses the importance of ensuring that the TDS details provided in Schedule TDS1 and Schedule TDS2 of the ITR form align with the information in Form 26AS, TDS certificates, or Form 16 issued by the deductor. Double-check that the Tax Deduction and Collection Account Number (TAN) of the deductor is correctly entered in the ITR.
Common Causes for Discrepancies in Form 26AS
Discrepancies may occur for various reasons, including:
- Non-filing of TDS returns by the deductor.
- Non-payment of TDS by the deductor.
- Incorrect Assessment Year (AY) or wrong PAN provided.
- Incorrect challan details submitted with the TDS returns.
- Erroneous challan details reported by the deductor.
- Misinformation uploaded by the bank.
- Incomplete information about the taxpayer in the TDS return.
- Mismatch between the reported and actual TDS deducted.
Typographical errors, such as incorrect PAN submissions or recording, may lead to incorrect TDS reflection in tax documents. Furthermore, data entry errors can exacerbate mismatches.
Occasionally, technical issues within the tax authority’s systems may also contribute to discrepancies between reported TDS and data shown in AIS or Form 26AS.
Steps to Correct TDS Data Mismatch
If the mismatch stems from non-disclosure by the taxpayer, submitting a revised or updated return is advisable to rectify the issue. Taxpayers can file a revised ITR or an updated ITR (ITR-U) if it is within the permissible time frame.
If Form 26AS is updated with the correct TDS amount, you can claim the credit. Experts suggest resolving the issue directly with the relevant TDS deductor.
In cases of mismatches due to non-payment of tax or incorrect disclosures, consulting with the related counterparty to rectify the issue is prudent to avoid prolonged disputes. If there are mismatches for other reasons, providing appropriate explanations is crucial.
When filing your ITR, confusion often arises regarding whether to wait for corrections in TDS data or to proceed with the available records. Generally, it is recommended to file the ITR with accurate TDS data based on your records, such as Form 16 or Form 16A. Doing so ensures that discrepancies can be clarified with the income tax department during the rectification process. For significant mismatches, taxpayers might want to wait for the deductor to submit a corrective return to ensure consistency in Form 26AS and AIS. However, if time is of the essence and the deductor has not made necessary corrections, you can still file the return using the TDS data available in Form 26AS or AIS. Be prepared for potential scrutiny or notices from tax authorities in case the mismatch continues.
Correcting Form 26AS Details
To correct details in Form 26AS, the income tax department suggests:
- Submitting a correction statement via the NSDL website only for the records requiring updates.
- If the error originated with the deductor, you should ask them to:
- File any pending TDS returns.
- Submit a revised TDS return if incorrect details were reported.
- If the bank made a mistake (like in the tax amount or PAN), request them to rectify the errors in the challan information they uploaded.