More taxpayers getting defective ITR notice from tax dept this year; How to rectify the defect
It appears that the number of taxpayers getting or likely to get 'Defective ITR' notices from the income tax department is higher than in previous years. There are many possible reasons why an income tax return (ITR) may get tagged as 'defective'. For instance, if your name in your PAN card does not match the name given in the ITR filed by you or if you have claimed TDS credit without reporting the corresponding income, etc. The reasons are endless, but ultimately, if your ITR is tagged as 'defective', then a notice under section 139(9) will follow. After receiving this notice, you have to fix the defect within the given timeline, which is usually 15 days.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
This year defective ITR notices are being received in larger numbers than before
Chartered accountants report that many of their clients have received defective ITR notices this year and the number of such notices received is more than last year.Chartered accountant Abhishek Soni, co-founder of Tax2Win, an ITR filing portal says: "Yes, the defective ITR notices have surged this season."
Chartered accountant Amit Bansal, Partner - Direct Tax, Singhania & Co, also says: "Yes, there has been a noticeable increase in defective ITR notices and invalid returns this year."
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— TaxationUpdates (@TaxationUpdates) "This rise is primarily attributed to errors such as incorrect selection of ITR forms, difficulties encountered by individuals filing their own returns, etc. The confusion with respect to the deductions in the new regime is also a major factor for these defects," says Bansal.
Soni of Tax2win says that among the many reasons for the rise in defective ITRs this year, one could be that the revised tax rules may be causing confusion, leading to a rise in errors during return filings. "Moreover, tax authorities may have been applying stricter scrutiny to returns, resulting in a greater number of notices for errors or discrepancies. If your ITR is found defective, the Assessing Officer (A.O.) will issue a notice and may give you a 15-day time period to correct the mistakes."
How to correct a defective ITR on the e-filing portal
According to Bansal, first you need to go to the e-filing ITR portal and log in using your credentials. Then Navigate to 'e-File' and select 'File Income Tax Return'. After that, proceed as per on- screen instructions. On the page where you are asked why you are filing an ITR, select 'Filed in Response to Notice u/s 139(9) to rectify the defect'.
Source: Income tax department website as of August 21, 2024The defective ITR notice that you receive will mention the exact defect in the submitted ITR. So, if you agree, you need to file a revised ITR correcting the highlighted defect.
If you don't agree with the defective ITR notice, you can select the 'Disagree' option available on the defective notice on the 'e-Proceedings' tab. "Make sure to provide a detailed explanation for your disagreement in the text box provided," says Soni from Tax2Win.
You can also communicate your disagreement to the jurisdictional A.O. You may even file an appeal in the income tax appellate tribunal if you are not happy with the decision of the A.O, as per Bansal.
"If a taxpayer disagrees with the defective ITR notice, they have the option not to correct the ITR as per the notice. In such cases, the original return will be treated as invalid, and it would be considered as if no return was filed. The taxpayer can explain why the return is not defective by filing a reply to the Assessing Officer, providing evidence or documents that support his/her claim. If the A.O. does not accept the taxpayer's explanation, the taxpayer can file an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]," says Bansal.
Possible reasons for getting a defective ITR notice
According to the income tax department website as of August 21, 2024, some of the common errors that make a return defective are as follows:The gross receipts shown in Form 26AS, on which credit for TDS has been claimed, are higher than the total of the receipts shown under all heads of income, in the return of income.Gross Total Income and all the heads of income are entered as "nil or 0" but tax liability has been computed and paid.The taxpayer's name in the ITR does not match the "Name" in the PAN database.Taxpayer has income under the head "Profits and gains of Business or Profession" but has not filled a Balance Sheet and Profit and Loss Account.According to Ankit Jain, Partner, Ved Jain & Associates, "If credit for Tax Deducted at Source (TDS) is claimed but the associated income has not been included in the return then also a ITR is termed as defective." Apart from these mistakes, it may also happen that you mistakenly entered the wrong tax payment challan number while filing the ITR, he adds.
Rectifying the mistake in the defective ITR may increase your tax liability and make you liable for paying penal interest
Jain advises that it is better to rectify the mistakes in the ITR and fix the issues highlighted in the defective ITR notice, even if it increases your tax liability. "If you fail to rectify the defect or submit a response, your ITR will be rejected, and it will be treated as if no ITR was filed. In this scenario, you will lose the opportunity to revise the original ITR. If the deadline for filing ITR has passed, your only options would be to file a belated ITR or an updated ITR (ITR-U)," he says.
Experts say that if your tax liability increases after accepting the mistakes highlighted in the defective ITR notice, you may also need to pay penal interest.
"The taxpayer will likely have to pay interest on the additional tax liability from the original due date of the ITR until the date of payment. This interest is charged under sections such as 234A (for delay in filing), 234B (for default in payment of advance tax), and 234C (for deferment of advance tax)," says Soni.
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This story originally appeared on: India Times - Author:Faqs of Insurances
