Less than two months after the due date to file income tax returns, individual taxpayers find themselves in a state of bewilderment as they receive intimations from the Income Tax Department. While in some cases the intimation asks for vaildation of bank account details, in others, these emails prompt individuals to revise their refunds, for instance.

As we delve into this matter, we highlight three distinct scenarios taxpayers are faced with after they file the returns.

Scenario 1: Return is filed but verification is pending

As of September 4, 2023, around 1.4 million income tax returns for Assessment Year (AY) 2023-24 have been filed but remain unverified by taxpayers. It is imperative for taxpayers to verify their I-T returns to complete the filing process successfully. Failure to do so within 30 days of submitting the return renders the ITR filed invalid unless the taxpayer secures a condonation of delay from the Income Tax Department.  Without a valid return, the I-T Department finds itself unable to process the ITR. To prompt taxpayers to act, it has sent reminder emails to encourage them to validate the return in a timely manner.

Taxpayers can e-verify their returns online using various options, including receiving a one-time password (OTP) on their mobile number registered with Aadhaar, generating an Electronic Verification Code (EVC) from their pre-validated bank account or demat account, obtaining an EVC through ATM (offline method), utilising Net Banking, or employing a Digital Signature Certificate (DSC). Taxpayers can, alternatively, opt to send a physical copy of their duly signed ITR-V to the Centralised Processing Centre (CPC) in Bengaluru within the specified timeframe to expedite processing of pending refund amounts. 

Scenario 2: Return is filed but details mismatch with Form 16/AIS

By September 5, 2023, approximately 1.2 million returns have been verified by the Income Tax Department but remained unprocessed due to the need for additional information from taxpayers. According to a press release from the I-T Department, communications concerning these mismatches are being dispatched to affected taxpayers. In such cases, the Department issues intimation requesting confirmation or revision of the claimed refund.

The reasons behind these intimations can range from an excessive claim of deduction under Chapter VI-A to the omission of certain income sources such as dividends or capital gains in the return. Incorrect claims relating to House Rent Allowance (HRA) or house loan deductions may also prompt these notifications. These intimations result from mismatch between the ITR filed and the Annual Information Statement or Form 16 of the taxpayer. The intimation will contain the reason for the intimation and will necessitate an additional step of confirmation from the taxpayer.

Through these intimations, the Income Tax Department provides taxpayers with an opportunity to revise their returns, should they find it necessary. It is crucial to note that receiving a tax intimation does not necessarily imply that there are erroneous claims in the taxpayer’s return of income. The mismatch may also be on account of inconsistencies in the data held by the tax department.  Hence, the taxpayer has the option to confirm that the ITR  filed by him is correct and that he would not want to make any alterations to the same.

The income tax intimation allows for a 30-day period from the date of the email to file a response. However, it is important to note that the income tax intimation does not outline specific consequences for delayed responses. Nonetheless, any delays in filing a response will invariably hinder the processing of the income tax return, leading to delays in the issuance of any due refunds to the taxpayer. 

Scenario 3 - Return is processed but refund is not yet issued

As of September 5, 2023, a staggering 6.98 crore returns for AY 2023-24 have been filed by taxpayers, and the I-T Department has successfully issued refunds in more than 2.45 crore cases. However, certain taxpayers have received intimations requesting validation of their bank accounts to facilitate the issuance of refunds to their designated accounts. There is no fixed category of taxpayers who receive this notice. In fact, this intimation may also be issued to taxpayers whose bank account details are pre-filled based on previous income tax returns and who have received refunds in the same bank account in previous years.

For taxpayers who receive an intimation for the validation of their bank account, the process is relatively straightforward. All they need to do is log in to their income tax portal and validate their bank account by receiving an OTP. Once the bank account is successfully validated, the I-T Department should proceed with the issuance of the refund. There is no requirement for these taxpayers to file a revised return or provide confirmation of the income tax return they have already filed.

It is essential to emphasise that an intimation is distinct from a notice. An intimation serves as a communication from the tax department, highlighting inconsistencies and providing taxpayers with an additional opportunity to rectify their refund claims. Importantly, an intimation does not invalidate the income tax return that has been filed, but it may temporarily delay the processing of the return and consequential refund.

The writer is Partner, Nangia Andersen India. (With inputs from Neetu Brahma)