Handling mismatch between salary income in return and Form 26AS (adjustments u/s 143(1)(a))

Published: May 7, 2018 at 8:09 pm

Last Updated on

Did you receive an email from the income tax department that there is a mismatch or inconsistency between salary income in return and Form 26AS?I did and this is how I responded. I am not a taxation expert, but I thought sharing this might help others and in any case myself. First of all, I think the IT department has goofed up in sending a similar notice en masse. Earlier, they used to consider the “Income chargeable under Salaries” mentioned in the TDS section and match it with the income mentioned in the salary section. Now they are comparing the gross income mentioned in form 26AS.

When they do this, naturally there will be a mismatch as form26AS shows the gross income before the deduction of tax-exempt allowances like HRA, transport etc. The “Income chargeable under Salaries”  shows the actual taxable income (before tax saving deductions). So naturally, there is a mismatch. As Muthu Krishnan pointed out, there is a way to enter the tax-exempt allowances in the ITR. However many of us do not do that.

We take the “Income chargeable under Salaries” shown in form 16 (but not in form 26AS) and enter it as gross income and do not report the tax-exempt allowances. The IT department did not mind this up to AY 2016-2017. This has now changed and hence this problem. So how to rectify this?

Rectifying mismatch between salary income in return and Form 26AS

First of all, I am only referring to the most common mismatch between salary income in return and Form 26AS: neglect of allowances in ITR. There could be many other reasons for such a notice and I cannot comment on those.

Option 1: Safest option is to revise the ITR with correct allowances and ensure net income matches the “Income chargeable under Salaries” shown in form 16. I recommend this for most people unless you have proper guidance or if you are adventurous like me.

Under details of income from salary (schedule S in ITR2), enter total salary + professional tax in item 1 (red box). Enter professional tax in item 5. Now item 6 (blue box) – income under head salary should match the corresponding figure in form 16. Enter this in schedule TDS. Enter the allowances in item 7 (green box) and now the mismatch will not be there.

entering salary details in itr2

Option 2: 

1 log into the income tax e-filing portal

2 click on e-proceedings

3 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)

4 When you click on disagree you will get a form like this

Rectifying mismatch between salary income in return and Form 26AS 

If you have income from other sources mention it in (1). Incorrect details quoted by the employer can be corrected but may require them to correct form 26as.

No 3, receipts not taxable is the main focus here. You can choose the appropriate allowance exempt under section 10 of the IT act and enter it there. I had to add transport allowance. You can add entries. No 4 is for NRIs.

In no 5, I added the tax on employer or professional tax. When I did this, the mismatch became zero as shown below.

adjustments u/s 143(1)(a) Rectifying mismatch between salary income in return and Form 26AS

Look at the blue box in the bottom right. I then submitted the form and got an email acknowledgement. Will keep you posted on the response from the IT dept.

What should you do?

I opted for “disagree” because of two reasons: (1) I have used the same approach for years without any problem. Why should they find fault with this now? (2) I am too lazy to revise ITR. Form 26AS should have the income under the head salaries clearly stated along with gross income. This is not the case now. Also, I am not too worried about their response. At worst they will ask me to revise ITR.

If you do not have experience in handling notifications from the IT office or if you are scared, seek help from a good CA. My cousin is a competent one living a few feet from me, but I did not consult him as I would like to DIY things and often face the music. Let us see how it goes.

A safe option would be to revise the ITR with the correct tax-exempt allowances and get net income to match income from head salaries in form 16. Then you can add all other tax saving deductions, capital gains etc. This should not take long if you have a copy of the old file. If the old file is missing, then you can download a copy of your return from the IT portal.

Did you get a similar notification? What are you going to do? Any comments on what I did? If you see anything wrong or would like to add, please do.

Credit Thanks to Antarpreet Singh for pointing a mistake.

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