Any income tax notice from the tax officials can be an unsettling experience for a taxpayer. It is particularly more confusing and stressful if you can’t understand why you got the notice. What if you find it’s regarding a mismatch in TDS (Tax Deducted at source)?
It would pique many questions in your mind, what went wrong? Was there a mistake while filing the tax return or is it an issue from the deductor’s side?
While it could be stressful, a TDS mismatch notice is quite common and can usually be resolved with a few simple steps. Let us find out why you may end up getting such a notice and how to correct it.
What is TDS and Why Does it Matter?
TDS is a mechanism by which tax is gathered at the source of income generation. When a person or entity makes some sort of payment, this could be salary, interest from banks, or professional fees to another person or business, a certain portion of this payment is deducted as a ‘tax’. This deducted tax is deposited with the government and the amount is later adjusted against the recipient’s total tax liability for the financial year.
Because TDS is applied to multiple types of income, the responsibility of deducting and depositing the tax falls on the payer which could be an employer, bank or any entity making the payment.
What can lead to a TDS Mismatch?
So a TDS mismatch can happen when the tax deducted by a taxpayer does not match the TDS claimed in the ITR filed by the taxpayer. This can happen due to several reasons, such as:
Missing TDS in Form 26AS: This form is a tax credit statement which shows all tax deductions linked to a taxpayer’s PAN. In case an employer or bank fails to update the TDS correctly, the claimed amount may not be reflected in Form 26AS.
Incorrect Reporting in ITRs: If a taxpayer mistakenly enters the wrong TDS amount the return can result in a mismatch.
Late or Incorrect Filing By Deductor: The error can also happen on the deductor’s side wherein if they delay filing the TDS returns late or end up reporting incorrect details, the same would not show in Form 26AS at the time of filing.
Multiple Sources of TDS: If tax is deducted from multiple sources and one of them has errors in reporting, a mismatch might show.
Why would the I-T Dept send a notice?
When there is any discrepancy between the TDS claimed in the tax return and the TDS recorded in Form 26AS, the tax officials may issue a notice under Section 143(1) or Section 245.
Such notices are sent to seek clarification and ensure accurate tax reporting in the ITRs. If you receive any such notification the best practice is to never ignore it as the same can lead to;
- Penalties
- Additional tax liability
- Interest charges on the discrepancy
What Should You Do?
If you find yourself pulled up by a TDS mismatch tax notice, here are some key steps to take -
Check Form 26AS: The first thing you can do is to log-into the Income Tax e-filing portal and download this form. This statement will show all deductions associated with the PAN. Once you have it, compare the TDS amounts here with those in the filed tax return.
Verify ITR: Next, you can double-check the tax return to ensure the correct TDS figures have been reported.
Contact the Deductor: If TDS is missing from Form 26AS, reach out to the deductor such as your employer or bank and request them to rectify their filing.
Revise ITR, if necessary: In case there is an error in the tax return, you should submit a revised return with the correct details.
Remember, that if a notice has been issued it is important to provide the necessary clarification along with supporting documents like TDS certificates, salary slips, or bank statements.
You can also avoid similar issues in the future by promptly checking Form 26AS before filing the return and ensure that all TDS deductions are correctly recorded.
