Income Tax department emails rattle taxpayers! Tax refunds, ITR processing on hold over claim mismatches – here’s what’s happening
Income Tax alert! The Income Tax Department is sending emails and SMSes to taxpayers, just ahead of the year-end, alerting them of mismatches in their deduction and exemption claims while processing Income Tax Returns. The blunt emails are being received by two categories of income tax payers – the salaried individuals whose claims are not reflecting in Form 16, and the wealthy individuals who appear to have donated money running into lakhs for charities. Form 16 is a consolidated statement of salary paid and tax deducted at source, which employers submit to the Income Tax Department on behalf of their staff. The income tax notices suggest that the assessment of income tax returns and the release of refunds have been paused for these categories of taxpayers. The unexpected arrival of these “do not reply” emails from the Income Tax Department in the inboxes of certain taxpayers has caused unease, according to an ET report.
ITR stuck: Why are you receiving tax alerts?
A December 23 release from the Income Tax Department described the exercise as one meant to assist assessees and encourage voluntary compliance. However, the sharp wording of the emails has left many taxpayers confused about their next steps. Those who have received alerts from the tax department are uncertain whether they should ignore the messages or retract the claimed benefits and file revised returns before the December 31 cut off.Also Read | ITR filing: Received ‘nudge’ from Income Tax Department for tax return & refund claims? Here’s what you need to doThe reasons cited by the Income Tax Department include incorrect permanent account numbers (PANs) of recipient charities, organisations not being registered under Section 80G of the Income Tax Act, or refund claims under the old tax regime that “appear to be high compared to the gross salary.”
Tax Trouble
Tax experts, however, point out that many such emails have been issued even where all details furnished by taxpayers are correct. According to the ET report, several individuals have expressed confusion after being questioned over donations made to a well known foundation in southern India that works in the area of yoga and spiritual development. As per the existing rules, taxpayers are eligible to claim a deduction of 50% of the qualifying donation amount.At the same time, this deductible amount is capped and cannot exceed 50% of the total contribution made to a trust or non profit organisation registered under Section 80G.Taxpayers who made contributions of over Rs 2 lakh appear to be the main recipients of these emails, which, notably, are not formal notices and do not reflect on the income tax portal.The messages cite several grounds for placing income tax return processing on hold. These include leave travel allowance claims that are significantly higher than the figures reported by employers in Form 16, capital gains declared in the return that do not seem to align with entries in the Annual Information Statement and the Taxpayer Information Summary, an unusually high house rent allowance claim, or donations reported above the permissible deduction threshold.The AIS and TIS are auto generated records prepared by the department using transaction level information and details reported by various third parties.Also Read | Income tax refund: Your refund may be delayed if revised return not filed by December 31, 2025 deadline – here’s why
Uncertainty on Tax Refunds
There is also increasing uncertainty over the timeline for receiving tax refunds, even among those who remain confident that claims in their income tax returns are accurate.“A policy that may have been conceived with good intentions has been undermined by ineffective communication. The use of charged terms such as ‘false claims’ for donations flagged by risk systems has rattled taxpayers who have followed the rules,” said Mohit Bang, partner at Hyderabad based chartered accountancy firm Trivedi & Bang. “We are increasingly seeing cases where taxpayers with legitimate and properly supported claims are being swept up by these automated notices,” he told ET.Bang noted that it reflects a deeper mismatch when contributions made via traceable banking channels to institutions approved by the government are described as “potentially false.” He added, “If the objective is to make compliance simpler, the department needs to fine tune its data analytics to minimise false positives. Automated communications should guide and correct, not intimidate, so that law-abiding citizens are not subjected to unnecessary stress despite full disclosure.”He also pointed to another concern, saying that refunds are being delayed for more than four months from the date returns are filed, while notices highlighting such issues are being issued barely a week before the filing deadline.According to Ashish Karundia, founder of chartered accountancy firm Ashish Karundia & Co, “The existing reporting framework already has strong safeguards in place, with recipient organisations required to submit Form 10BD and issue donor specific certificates in Form 10BE, which taxpayers rely on while filing their returns. “This information is easily accessible for system driven verification of legitimate claims. In the same way, although employers often impose internal deadlines for declaring investments or deductions, usually around November or December, there is no legal bar on claiming genuine deductions that were not communicated to employers within those timelines,” he told ET.In the case of salaried taxpayers, differences between figures in Form 16 and the income tax return often arise because investment details could not be submitted to employers in time.“Even though the objective may be constructive, the release of these communications toward the end of the year has unsettled many compliant taxpayers. A better approach would have been to engage earlier during the filing season, giving individuals sufficient opportunity to reconcile differences or revise returns in an orderly manner. Such messages should function as advisory nudges for compliance, not as suggestions of incorrect reporting, especially when claims are valid and properly supported,” Karundia said.
