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On 6 May 2018, many salaried employees got an Income Tax Notice, a notification from IT department regarding inconsistency between salary income and Form 26AS in ITR. First, relax you are not alone. Thie article talks about What does Income Tax Department consider as Income from Salary? Let’s understand why Income Tax Department sent notice by looking at Form 26AS, Form 16, Form 12BA.  It is basically due to missing details such as professional tax or exempted allowances. If you agree to the variance you can revise your return appropriately by filling in missing details. If Disagree then you can go for e-proceedings and respond.

How to agree to Notice for Inconsistency of Salary Income and Form 26AS

The Income Tax Notice, a notification from IT department is regarding inconsistency between salary income and Form 26AS in ITR. The breakup of salary in ITR2 is not shown properly. You can disagree and give the reason as missing HRA /Professional Tax. We would recommend agreeing as the problem is that salary details have not been filled properly. Adding the missing details does not incur any tax liability. You have to file the revised return only.

Go to the e-Proceeding tab.

  • Please click on the link ‘Proceeding Name’ and you will be taken to the next screen
  • Under response click on the Submit button
  • select the type of your response i.e., Agree/Partially Agree/Disagree.
  • If you select Agree The system will auto-populate the acknowledgement number of the latest revised return you have filed in response to the intimation.
  • After selecting ‘Agree’ click on submit button. And File Revised Return.
  • You have to file the revised return under section Revised 139(5). So say No to Question Are you filing u/s 119(2)(b)/92CD
Income Tax Notice Eproceedings Agree/Partially agree/Disagree

Income Tax Notice Eproceedings Agree/Partially Agree/Disagree

Income Tax Notice when Form 26AS does not meet Income from Salary in ITR

Let’s see what Income tax department considers as Income from salaries and you have to look at your Form 26AS, Form 16, Form 12BA.

For Income Tax Department their source of your salary income is Total amount Paid/credited in Form 26ASQuick e-File ITR option on incometaxindiaefiling.gov.in of ITR1 picks this amount in”Income under Salary” column.

  • It is not INCOME CHARGEABLE UNDER THE HEAD “SALARIES” (3-5) from Form 16 
  • It is not “Income under the Head “Salaries” of the Employee(other than from perquisites) Form 12BA

Income chargeable under head salaries is the sum of Perquisites

So if you look at Form 26AS and Part A which shows the TDS details your Income from Salary should match the amount mentioned in the Total amount paid/credited,

If your Income under Head Salaries in ITR does not match Total Amount Paid/Credited in Form 26AS you would get this notice. Income from Salary is filled in two places in ITR or Income Tax Return, one in Income from Salary and other TDS details.

You have 2 options to reply to notice and 30 days so take time don’t rush.

  • If you Agree to the notice fully or partially you have to revise the ITR. Income from Salary is filled in two places in ITR or Income Tax Return, one in Income from Salary and TDS details. Explained for Mismatch in Profesional Tax in ITR2 here and for Variance due to Missed Allowances here.
  • If you Disagree then you can go for e-proceedings and respond explained here
Income Tax Notice for Mismatch in salary and Form 26AS

Income Tax Notice for Mismatch in salary and Form 26AS

The ITR was filed with no details about Allowance exempted under section 10 as shown below.

Income Tax notice for mismatch due to missing allowances

Income Tax notice for mismatch due to missing allowances

Many also get an Income Tax notice when they had not filled in the Professional Tax while filing ITR as shown below. Thanks to Mahesh mirpuri(@invest_mutual )  for the details of the case.

Income Tax notice for mismatch in Professional tax

Income Tax notice for a mismatch in Professional tax

Form 26AS, Form 16 and Form 12BA for Income from Salary and ITR

Lets recap Form 26AS, Form 16 and Form 12BA.

  • Form 26AS also called as Annual Statement, is a consolidated tax statement which has all tax-related information (TDS, TCS, Refund etc) associated with a PAN. It shows how much of your tax has been received by the government and is consolidated from multiple sources like your salary/pension/interest income etc.  Our article Understanding Form 26AS and What to Verify in Form 26AS? explores Form 26AS in detail.
  • Income from Salary from Form 26AS

    Income from Salary from Form 26AS

  • Form 16 is the TDS certificate that an employer issues to you when TDS is deducted by them. When an employer deducts TDS on salaries, the income tax act requires that a certificate must be issued by the employer, where the details of tax deducted and deposited is certified. Our article Understanding Form 16: Tax on income explains form 16.
  • Form 12BA is provided by an employer to his employee when an employee receives ‘perquisites’ from his job. Our article Understanding Form 12BA covers Form 12 BA in detail.

Professional Tax

Profession tax the tax by the state governments in India. A person earning an income from salary or anyone practising a profession such as a chartered accountant, company secretary, lawyer, doctor etc. are required to pay this professional tax. Each state has a slab that it declares and the professional tax is deducted based on these slabs. There are some states and union territories that do not charge professional tax too. The states which impose the professional tax are Karnataka, Bihar, West Bengal, Andhra Pradesh, Telangana, Maharashtra, Tamil Nadu, Gujarat, Assam, Kerala, Meghalaya, Odisha, Tripura, Madhya Pradesh, and Sikkim.

Professional tax is collected by the employers from the monthly salaries. It is then paid by them to the government failing which they can have penalties imposed on them for not collecting or failing to pay the professional tax.

Income from Salaries in Form 16 and Form 26AS

Let’s look at Form 16 from the employer which shows the details of income and TDS. So in the example of Form 16 below,  Income chargeable under the head salaries is 2,313,706 and Form 26AS shows this as the Total amount deducted or credited.

Form 16 shows salary and details break up

Form 16 shows salary and details break up

Form 26AS with Total AMount Paid

Income from Salary from Form 26AS

Income from Salary from Form 26AS

Let’s look at another example where the salary mentioned in Form 26AS is not the income chargeable under the head salaries but Gross Salary + Profits+Perquistes. So, in this case, your filling of salary details will be different from that in the earlier case.

Income Tax Notice Salary in Form 26 and Form 26AS

Income Tax Notice Salary in Form 26 and Form 26AS

How to Revise ITR2 When Income tax notice is for variance in Professional Tax

If you have a similar case best option is to Agree to the notice and revise the ITR. So amount in Form 26AS should be Income chargeable under salaries + Professional tax.

For TDS just enter the figures from your Form 26AS. 

Please check Procedure to file Revised  Return here.

Income Tax Notice for Variance from Form 26AS for Professional tax

Income Tax Notice for Variance from Form 26AS for Professional tax

How to Revise ITR2 When Income tax notice is for variance in Exempted Allowances

If you have a similar case best option is to Agree to the notice and revise the ITR. Just add the Allowances in the proper category. The net income for the example will be  2,537,145+2400+573028=3,112,573 the figure mentioned in Form 26AS.

For TDS just enter the figures from your Form 26AS. 

Please check Procedure to file Revised  Return here.

Income Tax Notice for Variance from Form 26AS for Missing Exempted Allowances

Income Tax Notice for Variance from Form 26AS for Missing Exempted Allowances

How to Revise ITR2 When Income tax notice is for variance but with Perquisites

If you have perquisites then you need to open Form 12BA and see the value of income from Salaries other than perquisites. Add 2400 to it. You need to show your perquisites and other allowances to as shown in the image below. How to enter the details in ITR2 as per Form 26AS, Form 12BA is shown below.

Please check Procedure to file Revised  Return here.

Income Tax Notice Form 26AS revise ITR2 with Perquisites

Income Tax Notice Form 26AS revise ITR2 with Perquisites

Procedure to file Revised  Return

To file Revised Income Tax Return gather following information:

  • Receipt No of Original Return
  • Date of Submission of Original Return

To get it from the income tax filing website, login in and click on the ‘View Return’. You would see all the returns you have submitted electronically.  Get the Ack.No number as well as filing date.

Acknowledgement Number of Efiling return to Revise ITR

Acknowledgement Number of Efiling return to Revise ITR

  • Check for the discrepancy in the original return e-filed
  • Log on to incometaxindiaefiling website
  • Prepare Return just like like you filed the first time, correcting or filling what had got omitted earlier.
  • Go to part of ITR with Filing Status , PART-A General, for example shown in image below (Fill Excel ITR form : Personal Information,Filing Status)
  • For Whether original or revised return select R-Revised.
  • For Return filed under section select Revised 139(5)So say No to Question Are you filing u/s 119(2)(b)/92CD 
  • Section 119(2)(b) is when you file income tax returns for a financial year, whose due date of filing income tax return and due date of filing belated income tax return has elapsed.
  • Enter the E-filing acknowledgement receipt number from the ITR-V Which you would have got after filing the original return. 

Our article How to file Revised Income Tax Return ITR explains it in detail.

Revise ITR fill Details

Revise ITR fill Details

If you Disagree with Variance in Income from Salary and Form 26AS

If  you disagree with variance in Income from Salary and Form 26AS then

  • log into the income tax e-filing portal,
  • click on e-proceedings,
  • Click on respond and you will see (a) agree with an option to file a revised return (b) partially agree with an option to file a revised return and (c) disagree (I clicked this) as shown in the image below
Income Tax notice Variance Form 26AS disagree

Income Tax notice Variance Form 26AS disagree

Note: This article is evolving so please bear with us as we get more information. This article is for educational and informational use only. Please do not construe this as professional advice. Please consult a qualified financial tax consultant!

Related Articles:

Hope it helped in understanding why the Income Tax notice was issued? What does Income Tax Department consider income from salary, how to revise return. Please leave a comment if it helped /tweet/post on Facebook. If your case is different from the one taken in the article, you can mail the details to bemoneyaware@gmail.com.

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