Advance tax notice glitch: Taxpayers in wait-and-watch mode

Taxpayers are in wait-and-watch mode on their advance tax payments after the income tax department said that it had detected certain inconsistencies in the data of the securities market provided by one of the reporting entities in the statement of financial transactions (SFT).

Tax experts believe that taxpayers can await clarity from the income tax department on the issue, but should continue paying their tax based on their estimated liability. Alternatively, they can also log on to the income tax portal and report any discrepancy they have been alerted about.

Kuldip Kumar, Partner, Mainstay Tax Advisors said, “Taxpayers should pay their advance tax based on their calculations to ensure they meet the deadline. In case of any shortfall of payment, they will have to penal interest. Tax collections are monitored closely being an important resource for the Government to meet its expenditure.” He pointed out that even earlier, there were instances where the income tax department, based on last year's income level, used to send notices to pay advance tax, where amounts involved were large. 

“With the use of the latest technologies and availability of taxpayers' significant financial transactions with them, these notices are now based on current information. That is why authorities were prompt to advise taxpayers that there are some inconsistencies in the data of securities market and they are getting them corrected,” he said.

The due date for payment of advance tax is March 15. Failure to pay advance tax or payment of lower tax can lead to an interest of 1% per month on the unpaid amount.

Neeraj Agarwala, Partner, Nangia Andersen India noted that the Advance Tax E-Campaign, an initiative by the income tax department, aims to enhance taxpayer transparency. “If a taxpayer receives an alert that doesn't align with their transactions, they should log in to their portal and dispute the discrepancy. This action will assist the department in identifying and rectifying inaccuracies after thorough verification,” he said.

In a tweet on March 11, the income tax department said that based on feedback from taxpayers on the e-campaign for Advance Tax, the Department has identified certain inconsistencies in the data of the securities market (SFT-17) provided by one of the Reporting Entities. “The reporting entity has been asked to submit a revised statement based on updated information. Hence, the data on AIS will be updated,” it had said while advising taxpayers to wait for further updates on AIS based on the revised statement.

The clarification came after several taxpayers received notices for payment of advance tax that was much higher than their estimated liability for the current fiscal.

On March 10, the income tax department had announced that it is undertaking an e-campaign, which aims to inform such persons or entities of significant financial transactions, through email for assessment year 2024-25 and SMS, urging them to compute their advance tax liability correctly and deposit the due advance tax on or before March 15.