Inconsistencies in advance tax notices? Here's what you should note

Advance Income Tax:  The Income Tax department has identified "certain inconsistencies" in the data of the securities market provided by one of the reporting entities in the statement of financial transactions (SFT). In a social media post, the I-T department said after getting feedback from taxpayers on the e-campaign for advance tax, the inconsistencies got highlighted. The reporting entity has now been asked to submit a revised statement to the department.

Under the income tax rules, specified institutions are required to furnish SFT to the I-T department with the details of certain financial transactions or any reportable account registered/recorded/maintained by them during the year. The data submitted in SFT then gets reflected in the Annual Information Statement (AIS) of the taxpayer.

"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," the I-T department said on X.

The I-T department issued clarification in this regard due to errors in the financial transaction data, which resulted in taxpayers receiving notices for advance tax payments significantly higher than anticipated for FY23-24.

Taxpayers need to pay advance tax in four specified instalments: June, September, December and March of any financial year. It is to be noted that the deadline to pay advance tax is March 15. Therefore, taxpayers should carefully calculate the advance tax liability on the basis of their actual transactions during the financial year and not the AIS.

What's the problem?

Chirag Chauhan, a chartered accountant from Mumbai, noted that there have been many instances where the value of assets, such as shares or property, was increased significantly. For example, one share valued at Rs 450 was erroneously shown as Rs 45,000, and property sales of  Rs 1.2 crore were shown as Rs 12 crore.

Some even noted that taxpayers who deal in shares may have received such inflated demands. “Most of this inaccurate information has been reported by entities in the securities market. Taxpayers who deal in shares may have received it," Nitesh Buddhadev, founder, Nimit Consultancy, told Mint.

What's the solution?

The Income Tax Department will now have to initiate updates to the data on the Annual Information Statement (AIS). "The data on AIS (Annual Information Statement) will be updated. Taxpayers are advised to wait for further updates on AIS based on the revised statement," the I-T department said.

The I-T department had on Sunday said it has started sending emails and text messages to assessees whose taxes paid during the current fiscal is not commensurate with the financial transactions under an e-campaign for advance tax.

The campaign aims to intimate such persons/entities of significant financial transactions, through email (marked as Advance Tax e-Campaign-Significant Transactions for AY 2024-25) and SMS, urging them to compute their advance tax liability correctly and deposit the due advance tax on or before March 15.

Buddhadev added: “Taxpayers should not rush to pay the demanded tax. They should calculate their advance taxes based on the statements issued by brokers or mutual funds to calculate their tax liability."