How to Manage Income Mismatch in ITR Filing

An income mismatch in ITR filing arises when the income reported by a taxpayer differs from the information available with the Income Tax Department through records such as Form 16, Form 26AS, AIS, or TIS. These inconsistencies are commonly flagged by the system and may result in income tax notices, the need to file a revised return, or delays in receiving refunds. Detecting and correcting such differences at an early stage helps avoid penalties and ensures hassle-free tax compliance. At Jethani & Associates, careful review and accurate reporting remain a key focus to prevent such issues.

What is Income Mismatch in ITR Filing

Income mismatch in an Income Tax Return occurs when the income disclosed by the taxpayer does not correspond with the data captured by the Income Tax Department. This information is gathered from multiple third-party sources, including employers through Form 16, banks via TDS/TCS filings, mutual fund companies, and reports of property or financial transactions. The department uses systems like Form 26AS, the Annual Information Statement (AIS), and the Tax Information Summary (TIS) to cross-check these details. Any variation between these records and the income declared in the ITR leads to a mismatch, which may invite scrutiny, tax demands, or delays in processing refunds if not corrected in time.

Common Causes of Income Mismatch

Income mismatches can occur due to several reasons. A frequent cause is the non-reporting of certain income streams such as interest from savings accounts or fixed deposits, freelance receipts, rental income, or other incidental earnings. Selecting an incorrect ITR form or entering incorrect income figures can also result in inconsistencies. Errors by employers or banks while filing TDS returns may cause incorrect tax details to appear in Form 26AS. Even minor rounding differences or data entry mistakes can trigger mismatches. Additionally, individuals who have changed jobs during the financial year often fail to combine income from all employers, leading to incomplete disclosure.

How to Identify an Income Mismatch Before Filing

Taxpayers can reduce the risk of income mismatch by verifying details before filing their return. The Income Tax Department’s Compliance Portal allows taxpayers to review discrepancies between their records and departmental data. It is recommended to download and reconcile information from Form 26AS, AIS, and TIS, as these documents reflect income and tax details reported by third parties. AIS also captures dividend income, securities transactions, and high-value financial activities. A thorough comparison of these statements with personal records helps identify errors early and ensures accurate ITR filing.

Step-by-Step Process to Handle Income Mismatch in ITR

Dealing with an income mismatch requires a clear and methodical approach. Start by collecting all relevant income documents, including Form 16 from employers, bank statements, interest certificates, rent receipts, and capital gains statements. Match these records with AIS and Form 26AS to confirm that every income source has been correctly reported. If any discrepancy is noticed, access the Compliance Portal to understand the exact reason for the mismatch and correct it accordingly. Jethani & Associates emphasizes this initial verification as a crucial step in avoiding further complications.

If the return has already been filed with errors, a Revised ITR can be filed under Section 139(5) of the Income Tax Act, 1961. The revised return replaces the original filing and must be submitted before the end of the assessment year or before the assessment is completed. In case a notice under Section 143(1) or 143(2) is issued due to a mismatch, the response should include accurate income details supported by proper documentation. Where previously unreported income is identified later, filing an Updated Return (ITR-U) under Section 139(8A) may be necessary. Filing correctly and within timelines helps avoid penalties and safeguards refund claims.

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Handling TDS and Tax Credit Mismatches

TDS or tax credit mismatches are another common issue and usually arise when the deductor, such as an employer or bank, mentions an incorrect PAN or delays depositing the deducted tax. To resolve this, verify the TDS details shown in Form 26AS and AIS with salary slips or income records. If the issue is due to the deductor’s mistake, request them to submit a corrected TDS return. If the mismatch is caused by an error in reporting, it can be rectified by filing a Revised ITR. At Jethani & Associates, careful reconciliation of TDS and tax credits is followed to ensure that all eligible credits are accurately claimed.

Impact of Income Mismatch on Refunds and Notices

Unresolved income mismatches can delay refund processing or lead to notices from the Income Tax Department. When the income declared in the ITR does not align with departmental records, refunds are often kept on hold until clarification is provided. In some cases, notices under Section 143(1) or Section 143(2) may be issued. Significant mismatches may even result in reassessment proceedings or penalties for underreporting income. Timely responses and filing corrected returns through the official portal help in resolving such matters efficiently.

Important Considerations and Best Practices

Accurate reporting of income is essential to avoid mismatches. Selecting the correct ITR form based on income sources is critical. Ensure consistency between figures reported in Form 16, bank statements, and investment records. No income should be omitted, even if tax has already been deducted at source. Staying updated with CBDT notifications and maintaining records of all income-related documents is advisable, as these may be required to respond to departmental queries. Jethani & Associates follows these best practices to maintain accuracy and compliance in tax filings.

Conclusion

Managing income mismatch in ITR filing requires thorough verification of income details and timely correction of errors. By carefully reviewing Form 26AS, AIS, and TIS and addressing discrepancies at the earliest stage, taxpayers can avoid unnecessary scrutiny and delays. Accurate and transparent reporting not only speeds up refund processing but also helps maintain a clean and compliant tax record.

FAQs – Income Mismatch & ITR Filing

Q1. Does Jethani & Associates provide self-filing services or only assisted ITR filing?

Jethani & Associates primarily offers expert-assisted income tax return filing services. Each return is prepared and reviewed by qualified tax professionals to ensure accuracy, correct income reporting, and compliance with the Income Tax Act. This approach helps reduce errors, mismatches, and the risk of notices from the tax department.

Q2. Which is the best platform to file an Income Tax Return in India?

The official Income Tax Department e-filing portal is the authorized platform for filing ITRs in India. However, filing through a professional firm like Jethani & Associates ensures that income details, deductions, exemptions, and tax credits are properly reviewed before submission, reducing the likelihood of mismatches or post-filing issues.

Q3. Where can an income tax return be filed?

An income tax return can be filed online through:

The Income Tax Department’s e-filing portal, or
Through authorized tax professionals such as Jethani & Associates

Professional filing includes verification of income data from Form 16, Form 26AS, AIS, and TIS, followed by electronic submission and e-verification.

Q4. What should be done if income in Form 16 does not match the ITR?

If there is a mismatch between Form 16 and the income reported in the ITR, all income sources should be rechecked against Form 26AS, AIS, bank statements, and interest certificates. Any missing or incorrectly reported income should be corrected by filing a Revised ITR under Section 139(5) to avoid notices or penalties.

Q5. How can a taxpayer identify a tax credit mismatch?

Tax credit mismatches occur when TDS or TCS claimed in the ITR does not match Form 26AS or AIS. Taxpayers should:

Compare TDS entries in Form 26AS and TIS
Verify deductor details and amounts
Request correction from the deductor if required

If the mismatch is due to incorrect reporting, filing a revised return resolves the issue.

Q6. What action does the Income Tax Department take for unexplained income mismatches?

Unexplained income mismatches may result in:

Intimation under Section 143(1)
Scrutiny notice under Section 143(2)

Taxpayers must submit supporting documents such as salary slips, bank statements, or investment proofs. Failure to respond adequately may lead to additional tax demand or penalties.

Q7. Can an ITR be revised after filing?

Yes. A Revised ITR under Section 139(5) can be filed if any error or omission is discovered after filing the original return. The revised return replaces the original return and must be filed before the assessment is completed or before the end of the relevant assessment year.

Q8. How does Jethani & Associates assist in resolving income mismatch issues?

Jethani & Associates assists clients by:

Reviewing income data from AIS, Form 26AS, and TIS
Identifying reporting gaps or inconsistencies
Filing revised or updated returns where required
Assisting in drafting responses to income tax notices

This structured approach helps ensure timely compliance and minimizes litigation risks.

Q9. How can mismatch details be checked on the Compliance Portal?

After logging into the Income Tax e-filing portal, taxpayers can access mismatch information under:

Pending Actions, or
Compliance / e-Proceedings section

The portal provides transaction-level details and options to confirm, dispute, or correct information.

Q10. What is a Section 143(1) intimation due to mismatch?

A Section 143(1) intimation highlights differences between the return filed and the department’s data. These may relate to:

Income variance
Excess TDS claims
Computational errors

Taxpayers should review the intimation carefully and respond or file a revised return within the prescribed time limit.

Q11. Do small rounding-off differences cause income mismatch notices?

Minor rounding-off differences are generally ignored. However, consistent or significant differences across income heads may trigger automated checks. Income should be rounded off as per Section 288A to maintain consistency.

Q12. What is ITR-U and when should it be filed?

ITR-U (Updated Return) under Section 139(8A) allows taxpayers to disclose missed income or correct errors after the revised return deadline, within 24 months from the end of the relevant assessment year. It enables voluntary compliance and helps reduce exposure to penalties.

Q13. Can bank interest cause income mismatch?

Yes. Interest earned on savings accounts, fixed deposits, and recurring deposits is reported in AIS and often missed in ITRs, leading to mismatches if not disclosed.

Q14. Does AIS data always need to be fully accepted?

No. AIS data should be reviewed carefully. If any entry is incorrect or duplicated, taxpayers can provide feedback on the portal before filing or revising their return.

Q15. Can income mismatch delay refunds?

Yes. Mismatches may result in processing delays or adjustment of refunds until discrepancies are resolved.

Q16. Is professional assistance recommended for notice responses?

Yes. Professional assistance ensures accurate drafting of replies, proper documentation, and timely compliance, reducing the risk of further scrutiny.