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

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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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  1. I had received an e-mail exactly like the above, and the discrepancy was with transport allowance (that Rs.1600/- per month thing). Form 26AS had the higher amount. My CA suggested me to: (a)disagree to the proceeding initiated by IT Department; and (b)provide explanation stating that the differing amount falls under Section 10(14). In his opinion there was no need to revise the Return.

  2. Thanks for the valuable inputs.
    I plan to file a revised return and correct the mismatch.

    Can you please recommend what should we select for “Return filed under section” ?
    I though it would be Under Section 143 because the Income Tax action item is u/s 143.
    However 143 is not in the selection options while selecting the Section in ITR-2 form.

  3. creating alround confusion ; if there is any difference / mismatch , I T Dept should only ask
    the clarification ( IF AT ALL REQUIRED ) ; common people should not be harassed for
    no fault of their own ; I T Dept. should only catch the real culprit ; do they dare to question
    MLA / MP / Counsellors etc. etc. can common people live peacefully ?????????????????????????

  4. Thanks Pattu for this post. I received a similar notice from CPC and I plan to exercise ‘Disagree’ option. However, I didn’t see options to select many tax exempt allowances u/s 10 (conveyance, medical reimb, sodexo etc.) other than LTA (which you’ve shown in the example).

    What should I do in this case? Shall I mention a total of all exempted allowances in the last section – ‘Any other reason’ and proceed with the Disagreement?

  5. Pattu, Great detailed article as always ! I was about to consult a CA. My DIY spirit kept me going. (learnt from you). This was my first ITR-2 filing so was a bit unsure.

    I too had received an email on 6th May and decided to verify on your site and so dropped in a comment yesterday noon. After reading your dedicated post on this issue and digging into many other places, I learnt that it is a problem faced by a lot of folks. (I suppose all folks except those who use ITR-1). My hunch was right that this could be a goof up from the IT department.

    Here is the official communication of the same wherein they intimate in some way about the changes in method of Tax verification.

    What I find funny is that this intimation is dated November 10, a good 7 months into the AY 2017-18. Lot of folks like us would have filed returns already by then.

    I chose e-proceedings–>disagree and closed it appropriately. Let’s wait and see.

    One more point I noticed in ITR-2 is the following :
    You said:
    “A safe option would be to revise the ITR with the correct gross income as perform 26AS, add the tax-exempt allowanced and get net income to match income from head salaries in form 16”

    The problem with this approach is if we input the gross income in subheading 1 of Schedule S of ITR-2, then we cannot account for the HRA deduction even if we input the rent paid under subheading 7.iii. This is because subheading 7 is just an informative field. It does not get considered for the calculation of Net income, i.e. the final value in schedule S.(this is true for all subheading 7 items). Many people have mentioned this on other forums too.

    The only way out is we need to deduct all these items(Section 10 related) from the gross and then fill that value in the subheading 1. This is as per the item 1 description given as :
    “Salary (Excluding all exempt/ non-exempt allowances, perquisites & profit in lieu of salary as they are shown separately below)”

    But doing this will automatically cause a mismatch the way it has happened with most of us since again it boils down to a comparison between gross pay (form26as) and netPay(form-16 after section 10 deductions).

    Either the IT department should change their method of validation or change the ITR-2 filing utility(Java/Excel) to include appropriate fields to account all items unambiguously. They can do this at least for AY-2018-19.

    But for the AY-2017-18, discarding seems to be the most appropriate step assuming the mismatch is purely due to aspects described above.

    Let me know your findings…

  6. You would have received an email intimating you about the mismatch. Check point 2, second para, You can use section 139(5) for filing the revised return.

  7. You are absolutely right. IT dept. projects it’s abilities only on the law abiding middle class. This event is a classic case where they have manufactured a problem and expect the the end-user to rectify it. Let’s see if they at least provide a simple solution for the masses. They need to do this quick, given that there is a 30 day deadline for providing the response.

  8. I T Dept. should put all the I T R forms ( A/Y 2018 – 19 ) on their website clearly in taking out
    in printable form / way ( i.e., all should be able to take out prints of the required / relevant I T R
    forms , so that assessees can FIRST take out print copies of the relevant / required forms
    and fill it up first as a draft form , and after completing the form the assess can re-check
    and make any corrections required before finally sending it to I T R ; direct e – filing is
    not a good soluton creating problems in many ways .

  9. I too received a response for the exact same reason and I filed a revised return under Section 139(5). I included my transport and medical allowance against ‘7-iv: Other allowances’ under Schedule S in ITR2 yesterday afternoon.

    If I have seen this post before, I would went for Disagree option, but lets see what happens.

    I have been using ITR 2 for the past 3 years and all these years I used to put these allowances, but last year I somehow missed it.

    Thanks Pattu sir for the detailed explanation.

  10. hi sarath. mine is a similar case. 26as shows higher salary income. form 16 issued by my employer shows less (deducting exempt income). i am clear that my case falls under 10(14). but form 16 issued by my empoyer is a separate document which is not available with tax officials. they have 26as so they are right at their own. i am right on my own. but i do not have the details of exempt income with me, nor will my employer interested in digging records. they say that we have given form 16 after deducting, that is enough. now, can i assume the difference in amount from 26as with that in my return (i.e. from form 16 from where i have taken) as amount under 10(14). second, form 16 that i mention is employer created document and this is the only proof that i am having with me that my income under the head salary is less that that reported in 26as which is assumed to be after deductions. form 16 taken from traces is same as that of 26as. so, if i have to disagree, can i choose 10(14) option in sl no 3 of response form and write (or leave it blank if it is to be written in sl no 5) the differential amount in amount column. besides, do i need to write in sl no 5 that return filed as per deductions allowed and write the (or leave it blank if it is to be written in sl no 3) the differential amount in amount column. please suggest.

  11. Same case as that of Sharath. Please guide me on specific points. (1) in sl no 3, can I choose option 10(14) & in amount put the differential of 26as & form 16 or leave it empty if the same to be mentioned in sl no 5 (employer created one & not the one from Traces because form 16 from Traces shows the same salary income as in 26as). (2) in sl no 5, can I write return filed as per deductions allowed in form 16 & in amount put the differential of 26as & form 16 if the same for sl no 3 is left empty. (3) I have only employer created form 16 which is a proof for this difference but it is not possible to upload it during responding & it is not with tax officials also. (4) I am sure that the differential amount is for 10(14) but I do not have the calculation details, employer is lease bothered to help me saying they have already given us form 16. (5) unless tax officials see the calculation details of 10(14) or see our employer created form 16, will they consider our response, which is correct. (6) if they are not convinced, will they issue tax demand notice or give me chance to further show the documents. Please suggest.

  12. Is it also needed to mention differetial amount in amount colum of sl no 3 of response. Is it also wise to write in sl no 5 that return filed as per deductions allowed in form 16 & leave amiunt blank or write is here in place of sl no 3 amount.

  13. Thanks Pattu, I too received one, for me mismatch is due to conveyance allowance and home loan interest ( loss), took the Disagree option, hope it goes through, fingers crossed!

  14. not clear ; please explain in detail ( for the benefits of senior citizens ) ; can you
    you not send it in printable form .

  15. I finally responded with Disagree & putting the differential amount in Sl. No. 5 of Response Form with remarks as “Return filed as per salary income (after exempt allowances) given in Form No. 16 issued by employer”. Let’s see how they take it.

  16. Hi,
    I also received similar notice. Mismatch between income in 26AS and Form 16. The Form 26AS included Medical reimbursement and Professional tax, totaling Rs 17400. I clicked on Disagree and entered under column 5 and keyed in total Rs 17400. Upon clicking submit, it is not taking. It says file revised return or adequate reason. I have given the reason in space provided in column 5. Is there something else I need to do. Where to enter the reason.

  17. I finally went ahead by choosing ‘Disagree’ option and from Form 16, calculating entire total of exempt allowances u/s 10 + employment tax (2500). Used section 5 – Other for this total amount.

    Btw, is there any timeline by when we’ll be notified if this answer is satisfactory or might need to file a revise return?

  18. Mine was a different case… Form 16 has higher income than 26AS… employer had debited higher taxes in the initial months and there was no tax remaining to be debited during last quarter.. I was told that because no tax was debited, it doesn’t get reflected in 26 AS..

    I had a dilemma whether to fill details as per 26 AS (though tempting, because that would have meant, lower IT) or report as per Form 16… Though I reported as per the Form 16 and filed returns…

  19. As part of revise return under 139(5), need to fill Receipt No. What is the number need to be filled here? am not seeing any notice number as part of given notice (except Communication Reference No). Is it referring the original return’s acknowledgement.

  20. Same case for me. mismatch due to Conveyance Exemption and Tax on Employment for AY 2017.18, Seems this is common as you mentioned (en masee). Appreciate your help.

  21. I am no C.A. but I believe the confusingly-worded category “Transport allowance for citizens of India” is for Section 10(5) pertaining to Leave Travel Allowance exemption.
    For Transport Allowance paid by employer, I believe the correct dropdown choice would be “Any Allowance given for meeting Expenditure incurred for Official Purposes [Section 10(14)]”.

  22. Yes, I too noticed that “Transport Allowance for citizens of India” appears to pertain to LTA going by the section referenced.
    I was in a similar situation and used the “Disagree” option, picking the category “Any Allowance given for meeting Expenditure incurred for Official Purposes [Section 10(14)]” to report variance due to Transport Allowance from my employer.

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